MILWAUKEE, April 16 /PRNewswire-FirstCall/ -- Johnson Controls, Inc. (JCI) today reported record sales and income from continuing operations for the second quarter of fiscal 2008. Sales increased 11% reflecting growth in each of its businesses. Diluted earnings per share from continuing operations increased to $0.48 from $0.44 last year (adjusted for a 3-for-1 stock split effective October 2, 2007); excluding non-recurring tax benefits in the second quarter of fiscal 2007, diluted earnings per share from continuing operations increased 30%, from $0.37. The reported earnings per share are at the top of the range forecast by the company in January. Each of the company's businesses increased quarterly profits by more than 25% versus last year. The company also confirmed its full-year 2008 earnings guidance of 18% year-over-year growth. Chairman and Chief Executive Officer Stephen A. Roell said, "We continue to deliver strong sales and earnings growth in each of our businesses. We are executing on our growth strategies and improving our productivity and cost structure. Our focus on delivering greater value by improving comfort, safety and sustainability and our increasing presence in growing international markets will enable us to achieve a record performance in 2008." Second-Quarter 2008 Results Sales for the quarter ended March 31, 2008 rose 11% to a record $9.4 billion from $8.5 billion last year. Segment income was $453 million, up 29% from $351 million in the 2007 quarter. Income from continuing operations was $289 million, 28% higher than the prior year's $225 million (excluding the non-recurring tax benefits) due to the higher segment income. Building efficiency sales increased 11% to $3.3 billion from $3.0 billion due to increased global demand for the company's offerings for nonresidential buildings that improve energy efficiency and reduce greenhouse gas emissions. The company reported strong revenue growth in systems and services as well as global workplace solutions. Segment income increased 29% to $177 million from $137 million in 2007, due to the higher global volumes and improved margins. The backlog of uncompleted contracts at March 31, 2008 was $4.5 billion, up 15% versus the previous year, reflecting strong demand in domestic and international markets. Johnson Controls said that in the second quarter it was selected to participate in a multi-billion dollar, multi-year infrastructure upgrade program with the U.S. Air Force. The company also released new Metasys facility management system technology that increases its wireless connectivity capabilities. Power solutions sales were up 47% to $1.5 billion from $1.0 billion. The increase was primarily due to higher prices resulting from the pass-through of increased lead costs. Segment income increased 30% to $121 million from $93 million in the 2007 quarter due to operational efficiencies and improved performance of joint ventures in Asia. Excluding the impact of lead, power solutions margins in the 2008 quarter increased over the prior year. Johnson Controls said that it had successfully launched production of original equipment batteries for a new customer in the second quarter. Automotive experience sales for the second quarter of 2008 totaled $4.6 billion, up 2% from $4.5 billion. Revenues in Europe increased 9% while North American sales were 7% lower. Asia/Pacific revenues increased 8%. Industry light vehicle production in North America was down 8%, while in Europe it increased 1%. Segment income increased 28% to $155 million versus $121 million for the prior year quarter. Reflecting the benefits of operational efficiencies and improved pricing, North America income increased to $25 million from a loss of $1 million a year ago despite the lower production volume in the 2008 quarter. Income in Asia increased to $10 million from $2 million last year. The company said that its backlog of new business continued to increase in the second quarter as it received new interiors orders from Dacia, First Auto Works, Ford, General Motors, Kia, Nissan and Volkswagen. 2008 Full Year and Third-Quarter Outlook The fiscal 2008 full-year earnings outlook provided by the company on October 9, 2007 remains unchanged with diluted earnings per share from continuing operations increasing approximately 18% to $2.45 - $2.50 from $2.10 in 2007. The company increased its revenue forecast for the full year and now expects sales to grow 13% to $39 billion, versus the earlier guidance of $38 billion. For the third quarter of fiscal 2008, the company forecasts diluted earnings per share from continuing operations to increase 12 to 15%, to $0.74 to $0.76. This forecast excludes the potential impact on vehicle production from a prolonged labor strike of a supplier to a North American automotive customer. Mr. Roell said, "All three of our businesses participate in large, growing global markets. In addition, a significant portion of our revenues comes from recurring sources like commercial building services and aftermarket automotive batteries. Our business backlogs are strong and growing, giving us good visibility of our future earnings performance. We are focused on improving our cost structure, which will result in continued increases in the profitability of each of our businesses. With our diversified business portfolio, we are well positioned to achieve sustainable, profitable growth and are confident in our ability to achieve our financial targets." Johnson Controls is the global leader that brings ingenuity to the places where people live, work and travel. By integrating technologies, products and services, we create smart environments that redefine the relationships between people and their surroundings. Our team of 140,000 employees creates a more comfortable, safe and sustainable world through our products and services for more than 200 million vehicles, 12 million homes and one million commercial buildings. Our commitment to sustainability drives our environmental stewardship, good corporate citizenship in our workplaces and communities, and the products and services we provide to customers. For additional information, please 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 2008 and beyond 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 and include terms such as "outlook," "expectations," "estimates," or "forecasts." For those statements, the Company cautions that numerous important factors, such as automotive vehicle production levels and schedules, energy prices, the ability to mitigate the impact of higher raw material costs, the strength of the U.S. or other economies, currency exchange rates, cancellation of commercial contracts, changes to domestic and foreign tax rates as well as other factors discussed in the Company's most recent Form 10-K filing (dated November 29, 2007) 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,
2008 2007
Net sales $9,406 $8,492
Cost of sales 8,096 7,299
Gross profit 1,310 1,193
Selling, general and administrative expenses (888) (861)
Financing charges - net (66) (69)
Equity income 31 19
Income from continuing operations
before income taxes and minority interests 387 282
Provision for income taxes 81 17
Minority interests in net earnings of
subsidiaries 17 3
Income from continuing operations 289 262
Loss from discontinued operations,
net of income taxes - (4)
Loss on sale of discontinued
operations, net of income taxes - (30)
Net income $289 $228
Diluted earnings per share from
continuing operations $0.48 $0.44
Diluted earnings per share $0.48 $0.38
Diluted weighted average shares 601 598
Shares outstanding at period end 593 591
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
Six Months Ended March 31,
2008 2007
Net sales $18,890 $16,702
Cost of sales 16,273 14,435
Gross profit 2,617 2,267
Selling, general and administrative expenses (1,838) (1,664)
Financing charges - net (135) (138)
Equity income 48 48
Income from continuing operations
before income taxes and minority interests 692 513
Provision for income taxes 145 70
Minority interests in net earnings of
subsidiaries 23 13
Income from continuing operations 524 430
Loss from discontinued operations,
net of income taxes - (10)
Loss on sale of discontinued
operations, net of income taxes - (30)
Net income $524 $390
Diluted earnings per share from
continuing operations $0.87 $0.72
Diluted earnings per share $0.87 $0.65
Diluted weighted average shares 602 596
Shares outstanding at period end 593 591
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions; unaudited)
March 31, September 30,
2008 2007
ASSETS
Cash and cash equivalents $233 $674
Accounts receivable - net 6,451 6,600
Inventories 2,209 1,968
Other current assets 1,716 1,630
Current assets 10,609 10,872
Property, plant and equipment - net 4,324 4,208
Goodwill 6,401 6,131
Other intangible assets - net 793 773
Investments in partially-owned affiliates 854 795
Other noncurrent assets 1,638 1,326
Total assets $24,619 $24,105
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion
of long-term debt $1,017 $1,163
Accounts payable and accrued expenses 6,242 6,440
Other current liabilities 2,254 2,317
Current liabilities 9,513 9,920
Long-term debt 3,301 3,255
Minority interests in equity of
subsidiaries 150 128
Other noncurrent liabilities 2,060 1,895
Shareholders' equity 9,595 8,907
Total liabilities and
shareholders' equity $24,619 $24,105
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
Three Months Ended March 31,
2008 2007
Operating Activities
Net income $289 $228
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 194 188
Equity in earnings of partially-owned
affiliates, net of dividends received (22) (15)
Minority interests in net earnings
(loss) of subsidiaries 17 3
Deferred income taxes (29) (54)
Loss on sale of discontinued operations - 30
Other - net 13 28
Changes in working capital, excluding
acquisition and divestiture of businesses:
Receivables (57) (277)
Inventories (68) (43)
Accounts payable and accrued liabilities 47 353
Change in other assets and liabilities (86) 14
Cash provided by operating activities 298 455
Investing Activities
Capital expenditures (174) (211)
Sale of property, plant and equipment 17 9
Acquisition of businesses, net of cash acquired (43) -
Business divestitures - 35
Other - net (42) 2
Cash used in investing activities (242) (165)
Financing Activities
Decrease in short and long-term debt - net (89) (270)
Payment of cash dividends (78) (126)
Other - net (63) 26
Cash used in financing activities (230) (370)
Decrease in cash and cash equivalents $(174) $(80)
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
Six Months Ended March 31,
2008 2007
Operating Activities
Net income $524 $390
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 385 374
Equity in earnings of partially-owned
affiliates, net of dividends received - (32)
Minority interests in net earnings of
subsidiaries 23 13
Deferred income taxes (20) (49)
Non-cash restructuring costs - 30
Other - net 52 46
Changes in working capital, excluding
acquisition and divestiture of businesses:
Receivables 429 (128)
Inventories (150) (90)
Accounts payable and accrued liabilities (763) 73
Change in other assets and liabilities (4) (20)
Cash provided by operating activities 476 607
Investing Activities
Capital expenditures (361) (441)
Sale of property, plant and equipment 32 17
Acquisition of businesses, net of cash acquired (69) -
Business divestitures - 35
Other - net (90) (54)
Cash used in investing activities (488) (443)
Financing Activities
Decrease in short and long-term debt - net (196) (209)
Payment of cash dividends (143) (130)
Other - net (90) 54
Cash used in financing activities (429) (285)
Decrease in cash and cash equivalents $(441) $(121)
FOOTNOTES
1. Business Unit Summary
Three Months Ended Six Months Ended
March 31, March 31,
(in millions) (unaudited) (unaudited)
2008 2007 % 2008 2007 %
Net Sales
Building efficiency $3,299 $2,963 11% $6,543 $5,885 11%
Automotive experience 4,650 4,541 2% 9,239 8,761 5%
Power solutions 1,457 988 47% 3,108 2,056 51%
Net Sales $9,406 $8,492 $18,890 $16,702
Segment Income
Building efficiency $177 $137 29% $340 $260 31%
Automotive experience 155 121 28% 233 156 49%
Power solutions 121 93 30% 254 235 8%
Segment Income $453 $351 $827 $651
Financing charges - net (66) (69) (135) (138)
Income from continuing
operations before income
taxes and minority
interests $387 $282 $692 $513
Net Sales
Products and systems $7,593 $6,841 11% $15,302 $13,533 13%
Services 1,813 1,651 10% 3,588 3,169 13%
$9,406 $8,492 $18,890 $16,702
Cost of Sales
Products and systems $6,725 $6,034 11% $13,467 $11,944 13%
Services 1,371 1,265 8% 2,806 2,491 13%
$8,096 $7,299 $16,273 $14,435
Building efficiency -- Provides facility systems and services including
comfort, energy and security management for the non-residential buildings
market and provides heating, ventilating, and air conditioning products
and services for the residential and non-residential building markets.
Automotive 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 -- Services both automotive original equipment
manufacturers and the battery aftermarket by providing advanced battery
technology, coupled with systems engineering, marketing and service
expertise.
Beginning in fiscal year 2007, Company management, including the chief
operating decision maker, adjusted their measurement of business unit
performance, changing from operating income to segment income, which
represents income from continuing operations before income taxes and
minority interests excluding restructuring charges and net financing
charges. The primary reason for the modification was to reflect equity
income in earnings for each business operation given its growing
significance to the Company's global business strategies.
2. Income Taxes
In June 2006, FASB issued FASB interpretation No. 48, "Accounting for
Uncertainty in Income Taxes -- an interpretation of FASB Statement No.
109" (FIN 48). FIN 48 prescribes a comprehensive model for how a company
should recognize, measure, present, and disclose in its financial
statements uncertain tax positions that a company has taken or expects to
take on a tax return. The Company adopted FIN 48 as of October 1, 2007.
Upon adoption, the Company increased its existing reserves for uncertain
tax positions by $93 million. The increase was recorded as a cumulative
effect adjustment to shareholders' equity of $68 million and an increase
to goodwill of $25 million related to prior year business combinations. As
of the adoption date, the Company had gross tax affected unrecognized tax
benefits of $616 million of which $475 million, if recognized, would
affect the effective tax rate. Also as of the adoption date, the Company
had accrued interest expense and penalties related to the unrecognized tax
benefits of $75 million (net of tax benefit). The Company recognizes
interest and penalties related to unrecognized tax benefits as a component
of income tax expense or goodwill, when applicable.
The tables below show a reconciliation of the provision for income taxes for the three and six months ended March 31, 2007 (in millions):
Three Months Ended Six Months Ended
March 31, 2007 March 31, 2007
Amount Tax Rate Amount Tax Rate
(unaudited) (unaudited)
Federal, state and
foreign income tax
expense $59 21.0% $107 21.0%
Effective tax rate
adjustment (5) -
Change in tax status of
foreign subsidiary (22) (22)
Income tax audit
resolutions (15) (15)
Provision for income taxes $17 6.3% $70 13.6%
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Johnson Controls, Inc.
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