MILWAUKEE, April 19 /PRNewswire-FirstCall/ -- Johnson Controls, Inc.
(NYSE: JCI) today reported record results for the second quarter of fiscal
2006. In addition, the company increased its full-year earnings outlook.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030423/JCILOGO )
Chairman and Chief Executive Officer John M. Barth said, "The quarterly
operating performance was in line with our expectations. Our strategies for
profitable growth and disciplined approach to cost reduction and quality
improvements continue to enable us to achieve our financial commitments. We
remain confident that we will extend our track record for consecutive years
of record sales and earnings in 2006."
Mr. Barth continued, "We have 136,000 employees around the world who
are devoted to our customers, to continuous improvement and to innovation.
They make us successful, and I commend them for their efforts."
Second-Quarter Results
For the three months ended March 31, 2006, sales increased 18% to a
record $8.2 billion from $6.9 billion last year, primarily reflecting
increases in the building efficiency and power solutions businesses. The
negative effect of foreign currency in the quarter reduced sales by
approximately $315 million.
Operating income was a record $266 million versus $43 million which was
reduced by a 2005 restructuring charge of $210 million. The tax rate in the
2006 quarter was 17.3%, reflecting a cumulative reduction in the annual
base effective tax rate to 21% from 24.3% (see tax note). This reduction
principally reflects a higher proportion of 2006 earnings coming from lower
tax jurisdictions. The company expects the tax rate in 2007 to be within
the range of 23% to 24%.
Income from continuing operations in the current quarter was $162
million versus $54 million in the prior year. Diluted earnings per share
from continuing operations were $0.83 compared with $0.28 in the prior
year.
Second-Quarter Results Excluding Special Items (Non-GAAP)
The following discussion focuses on the performance of the ongoing
operations of the company and therefore excludes 2005 special items such as
restructuring costs, gains from businesses divested, and a tax credit. A
reconciliation to GAAP measures is provided in the footnotes to the
attached Condensed Consolidated Financial Statements.
Operating income was 5% higher than the prior year due to increased
earnings from the building efficiency and power solutions businesses.
Income from continuing operations of $162 million compares with $165
million for 2005, as the net interest expense and acquisition accounting
related to the December 2005 York acquisition more than offset York's
earnings and the benefit of the lower base effective tax rate. Diluted
earnings per share from continuing operations were $0.83 versus $0.85 in
the prior year.
Interior experience sales for the second quarter of 2006 totaled $4.8
billion, approximately level with sales in 2005 while operating income was
$135 million, 1% lower than in the prior year. Excluding the negative
effect of foreign currency, sales increased 5% and operating income
increased 8%. Industry light vehicle production in North America was
approximately 4% higher; European production is estimated to have been up
2%. The European interiors operating margin increased over the prior year.
The North American operating margin declined year-over-year due to
commodity pressures and a negative vehicle mix, but improved slightly
compared to the first quarter of 2006.
Power solutions sales were up 29% to $874 million from $680 million due
to the impact of the July 2005 acquisition of Delphi's battery business as
well as higher organic shipments. Operating income increased 14% to $75
million from $66 million due to the higher volume and improved operational
efficiencies. Operating margin declined due to record high lead costs, most
of which are expected to be recovered in customer pricing, as well as the
Delphi battery acquisition.
Building efficiency sales increased 74% to $2.5 billion from $1.4
billion in 2005 primarily reflecting the York acquisition as well as
increased sales of control systems and services for non-residential
buildings in North America. Operating income increased 10% to $56 million
from $51 million due to the higher volume. Excluding non-recurring
acquisition costs of $22 million, operating income was up 53%. York's
results improved over its 2005 second quarter, led by a strong performance
by its residential air conditioning business. The backlog of uncompleted
contracts was $3.3 billion, up 8% from the previous year (pro-forma
including York).
2006 Full Year and Third-Quarter Outlook
Johnson Controls forecast that its diluted earnings per share from
continuing operations for 2006 would be in a range of $5.25 - $5.35,
including a $0.22 to $0.24 benefit from the lower effective tax rate. The
company previously provided earnings guidance of $5.00 to $5.15 per share
from continuing operations. Sales expectations for the year are unchanged
at approximately $32 billion.
For the third quarter of 2006 the company anticipates diluted earnings
per share from continuing operations of $1.65 to $1.70, an increase of 26%
to 30% over the $1.31 per share earned in the third quarter of 2005.
Johnson Controls said the expected substantial increase in earnings in
the second half of 2006 is primarily attributable to its building
efficiency business, reflecting the absence of York acquisition accounting
costs, the positive seasonality of the air conditioning industry and
increased customer demand. The company said it also expects a continued
strong performance by its European interiors and power solutions
businesses.
The company expects that its financial position will remain strong. It
anticipates that its ratio of total debt to total capitalization will
decline to approximately 40% by the end of 2006 from 45% at March 31, 2006.
"We continued to make progress transforming our businesses to take
advantage of the global growth opportunities," Mr. Barth said. "The
underlying performance of each of our businesses continues to improve.
Additionally, as we improve our cost structure, we continue to identify
more opportunity to deliver greater value to our customers."
Johnson Controls is a global leader in interior experience, building
efficiency and power solutions. The company provides innovative automotive
interiors that help make driving more comfortable, safe and enjoyable. For
buildings, it offers products and services that optimize energy use and
improve comfort and security. Johnson Controls also provides batteries for
automobiles and hybrid electric vehicles, along with systems engineering
and service expertise. Johnson Controls (NYSE: JCI), founded in 1885, is
headquartered in Milwaukee, Wisconsin. For additional information, visit
http://www.johnsoncontrols.com.
Johnson Controls, Inc. ("the Company") has made forward-looking
statements in this document pertaining to its financial results for fiscal
2006 that are based on preliminary data and are subject to risks and
uncertainties. All statements other than statements of historical fact are
statements that are or could be deemed forward-looking statements,
including information concerning possible or assumed future risks. For
those statements, the Company cautions that numerous important factors,
such as automotive vehicle production levels and schedules, the ability to
mitigate the impact of higher raw material and energy costs, the strength
of the U.S. or other economies, currency exchange rates, cancellation of
commercial contracts, labor interruptions, the successful integration of
York, as well as those factors discussed in the Company's Form 8-K filing
(dated January 19, 2006) and the risk factors as filed with the SEC January
9, 2006, 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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
Three Months Ended March 31,
2006 2005
GAAP GAAP Non-GAAP
Net sales $8,167 $6,899 $6,899
Cost of sales 7,114 6,072 6,072
Gross profit 1,053 827 827
Selling, general and administrative
expenses 787 574 574
Restructuring costs - 210 -
Operating income 266 43 253
Interest expense - net (69) (28) (28)
Equity income 20 19 19
Miscellaneous - net (8) (12) (12)
Income from continuing operations before
income taxes and minority interests 209 22 232
Provision (benefit) for income taxes 36 (38) 58
Minority interests in net earnings of
subsidiaries 11 6 9
Income from continuing operations 162 54 165
Income and gain on sale from discontinued
operations, net of income taxes 3 149 4
Net income $165 $203 $169
Diluted earnings per share from
continuing operations $0.83 $0.28 $0.85
Diluted earnings per share $0.84 $1.04 $0.87
Diluted weighted average shares 196 194 194
Shares outstanding at period end 195 192 192
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
Six Months Ended March 31,
2006 2005
GAAP GAAP Non-GAAP
Net sales $15,695 $13,517 $13,517
Cost of sales 13,725 11,884 11,884
Gross profit 1,970 1,633 1,633
Selling, general and administrative
expenses 1,473 1,161 1,161
Restructuring costs - 210 -
Operating income 497 262 472
Interest expense - net (114) (54) (54)
Equity income 44 40 40
Miscellaneous - net - (16) (16)
Income from continuing operations before
income taxes and minority interests 427 232 442
Provision for income taxes 74 1 108
Minority interests in net earnings of
subsidiaries 24 21 24
Income from continuing operations 329 210 310
Income and gain on sale from discontinued
operations, net of income taxes 1 161 16
Net income $330 $371 $326
Diluted earnings per share from
continuing operations $1.68 $1.08 $1.59
Diluted earnings per share $1.69 $1.91 $1.68
Diluted weighted average shares 196 194 194
Shares outstanding at period end 195 192 192
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions; unaudited)
March 31, September 30, March 31,
2006 2005 2005
ASSETS
Cash and cash equivalents $154 $171 $245
Accounts receivable - net 5,661 4,987 4,522
Inventories 1,598 983 890
Assets of discontinued operations 145 - -
Other current assets 1,352 998 942
Current assets 8,910 7,139 6,599
Property, plant and equipment - net 3,950 3,581 3,384
Goodwill - net 5,672 3,733 3,674
Other intangible assets - net 791 289 287
Investments in partially-owned
affiliates 470 445 423
Other noncurrent assets 1,376 957 848
Total assets $21,169 $16,144 $15,215
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion
of long-term debt $1,028 $765 $601
Accounts payable and accrued
expenses 5,348 4,686 4,279
Liabilities of discontinued
operations 36 - -
Other current liabilities 2,062 1,390 1,300
Current liabilities 8,474 6,841 6,180
Long-term debt 4,185 1,577 1,665
Minority interests in equity of
subsidiaries 138 196 143
Other noncurrent liabilities 2,069 1,472 1,535
Shareholders' equity 6,303 6,058 5,692
Total liabilities and
shareholders' equity $21,169 $16,144 $15,215
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
Three Months
Ended March 31,
2006 2005
Operating Activities
Net income $165 $203
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 181 159
Equity in earnings of partially-owned
affiliates, net of dividends received (7) (7)
Minority interests in net
earnings of subsidiaries 11 6
Gain on sale of discontinued operations - (145)
Other - net 74 (58)
Changes in working capital, excluding
acquisitions and divestitures of businesses:
Receivables 39 (467)
Inventories (55) 8
Accounts payable and accrued liabilities (61) 349
Change in other assets and liabilities 11 138
Cash provided by operating activities 358 186
Investing Activities
Capital expenditures (193) (141)
Sale of property, plant and equipment 7 4
Business divestitures - 687
Other - net (21) 27
Cash (used in) provided by
investing activities (207) 577
Financing Activities
Decrease in short and long-term debt - net (114) (534)
Payment of cash dividends (105) (92)
Other - net 54 -
Cash used in financing activities (165) (626)
Increase (decrease) in cash and
cash equivalents $(14) $137
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
Six Months
Ended March 31,
2006 2005
Operating Activities
Net income $330 $371
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 346 321
Equity in earnings of partially-owned
affiliates, net of dividends received 1 (28)
Minority interests in net
earnings of subsidiaries 24 21
Gain on sale of discontinued operations - (145)
Other - net 82 (56)
Changes in working capital, excluding
acquisitions and divestitures of businesses:
Receivables (10) (249)
Inventories (43) (2)
Accounts payable and accrued liabilities (336) 48
Change in other assets and liabilities (21) 74
Cash provided by operating activities 373 355
Investing Activities
Capital expenditures (262) (283)
Sale of property, plant and
equipment 13 8
Acquisition of businesses, net of
cash acquired (2,564) (33)
Business divestitures - 687
Other - net 65 13
Cash (used in) provided by
investing activities (2,748) 392
Financing Activities
Increase (decrease) in short and
long-term debt - net 2,352 (519)
Payment of cash dividends (109) (96)
Other - net 115 14
Cash provided by (used in)
financing activities 2,358 (601)
Increase (decrease) in cash and
cash equivalents $(17) $146
FOOTNOTES
1. Business Highlights
Three Months Six Months
Ended March 31, Ended March 31,
(in millions) (unaudited) (unaudited)
2006 2005 % 2006 2005 %
Net Sales
Building efficiency $2,490 $1,432 74% $4,298 $2,810 53%
Interior experience 4,803 4,787 0% 9,548 9,307 3%
Power solutions 874 680 29% 1,849 1,400 32%
Total $8,167 $6,899 $15,695 $13,517
Operating Income
Building efficiency $56 $51 10% $93 $86 8%
Interior experience 135 136 -1% 220 227 -3%
Power solutions 75 66 14% 184 159 16%
Total $266 $253 $497 $472
Restructuring costs - (210) - (210)
Consolidated operating
income $266 $43 $497 $262
Building efficiency - Provides facility systems and services including
comfort, energy and security management for the non-residential buildings
market and provides heating, ventilating, air conditioning and
refrigeration products and services for the residential and non-residential
buildings market.
Interior experience - Designs and manufactures interior systems and
products for passenger cars and light trucks, including vans, pick-up
trucks and sport/crossover utility vehicles.
Power solutions - Designs and manufactures automotive batteries for the
replacement and original equipment markets.
2. Acquisition
On December 9, 2005, the Company completed its acquisition of York
International Corporation (York). The Company paid $56.50 for each
outstanding share of common stock plus the assumption of debt. The total
value of the acquisition was approximately $3.2 billion, including
approximately $565 million of debt.
3. Discontinued Operations
The Company acquired York's Bristol Compressor business as part of the
York acquisition on December 9, 2005. The Company is currently exploring
strategic alternatives for this business.
In February 2005, the Company completed the sale of its engine
electronics business to Valeo for approximately 316 million euro, or
approximately $419 million. This non-core business was a part of the Sagem
SA automotive electronics business that was acquired in fiscal 2002 and was
included in the interior experience business.
In March 2005, the Company completed the sale of its Johnson Controls
World Services Inc. subsidiary to IAP Worldwide Services Inc. for
approximately $260 million. This non-strategic business was acquired in
fiscal 1989 from Pan Am Corporation and was included in the building
efficiency business.
The Bristol Compressor business, the engine electronics business and
the Johnson Controls World Services Inc. subsidiary are reported as
discontinued operations in the Condensed Consolidated Financial Statements
in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets."
4. Income Taxes
The Company's estimated annual base effective income tax rate for
continuing operations declined to 21.0% from the 24.3% used in the prior
quarter and from the 25.7% used for the prior fiscal year, primarily due to
increased income in certain foreign jurisdictions with a rate of tax lower
than the U.S. statutory tax rate, decreased income in higher-tax
jurisdictions and certain tax planning initiatives. The adjustment to the
effective tax rate resulted in a $14 million cumulative reduction in income
tax expense for the six months ended March 31, 2006, which impacted diluted
earnings per share from continuing operations by $0.07.
The table below shows a reconciliation of the tax provision, as
reported, for the three and six months ended March 31, 2006 (amounts in
millions):
Three Months Ended Six Months Ended
March 31, 2006 March 31, 2006
Amount Tax Rate Amount Tax Rate
(unaudited) (unaudited)
Base effective tax rate $44 21.0% $104 24.3%
Reduction in base effective tax rate (7) (14)
37 90 21.0%
Valuation allowance release (32) (32)
Foreign earnings repatriation 31 31
Change in status of foreign
subsidiary - (11)
Disposition of a joint venture - (4)
Tax provision $36 17.3% $74 17.3%
5. Non-GAAP Reconciliation
The following tables reconcile the Company's Non-GAAP amounts included
in the press release to the most directly comparable GAAP measure (in
millions, except for per share amounts):
Three Months Ended
March 31, 2005
(unaudited)
Non-GAAP operating income $253
Restructuring costs (210)
GAAP operating income $43
Three Months Ended
March 31, 2005
(unaudited)
Non-GAAP income from continuing operations $165
Restructuring costs (180)
European capital loss tax credits 69
GAAP income from continuing operations $54
Three Months Ended
March 31, 2005
(unaudited)
Non-GAAP diluted EPS from
continuing operations $0.85
Restructuring costs (0.92)
European capital loss tax credits 0.35
GAAP diluted EPS from continuing operations $0.28
Full Year Earnings Per Share Guidance
(unaudited)
2006 2005
(estimate) (actual) % Inc
Non-GAAP EPS from continuing $5.25-$5.35 $4.41 * 19-21%
operations
Restructuring costs - (0.92)
European capital loss tax credits - 0.40
GAAP EPS from continuing operations $5.25-$5.35 $3.90 *
* Due to the use of weighted-average shares outstanding for the fiscal
year in computing earnings per share, the sum of the quarterly
components may not equal the per share amounts listed for the fiscal
year.
SOURCE Johnson Controls, Inc.
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