Johnson Controls Q1 2010 Revenues Increase 15% With Record Earnings; Company Raises Sales and Earnings Forecast
MILWAUKEE, Jan. 22, 2010 -- For the first quarter of fiscal 2010, Johnson Controls reported a double-digit increase in sales as well as record quarterly earnings. The company also increased its estimate for 2010 earnings.
Highlights for the company's first quarter of 2010 include:
-- Net sales of $8.4 billion vs. $7.3 billion in Q1 2009, up 15%
-- Record income from business segments of $406 million vs. a Q1 2009
loss
-- Record net income; earnings per diluted share of $0.52 ($0.43 per
diluted share excluding non-recurring items)
-- Free cash flow of $631 million
-- Net debt reduction of $552 million
Income from business segments in the 2010 first quarter totaled $406 million compared with a loss of $310 million (or a loss of $48 million excluding non-recurring items) in the fiscal 2009 quarter. Net income was $350 million versus a year-ago loss of $608 million. Earnings per diluted share was $0.52 in the first quarter of 2010 versus a loss of $1.02 last year.
The 2010 quarter includes a non-recurring tax benefit of $62 million, or $0.09 per diluted share. Excluding this non-recurring item as well as the non-recurring items in the 2009 first quarter, net income was a record $288 million in Q1 2010 versus a loss of $79 million in 2009. Earnings per diluted share excluding the items was a record $0.43 in the 2010 quarter compared with a loss of $0.13 in Q1 2009. The company said it believes that using the adjusted numbers provides a more meaningful comparison of its underlying operating performance.
"We achieved record results in the first quarter despite what is still a very challenging economic environment in all of our markets. We benefited from higher sales supported by the cost improvement initiatives we took over the past year," said Stephen A. Roell, Johnson Controls Chairman and Chief Executive Officer.
Automotive Experience sales in the quarter increased 31% to $4.1 billion versus $3.1 billion last year due primarily to higher production volumes in Europe and North America. Excluding the impact of currency, sales were up 24%. North American revenues increased 14% while European sales were up 47%. Sales in China, which are mostly generated through unconsolidated joint ventures, more than doubled. Johnson Controls has a 45% share of the Chinese auto seating market.
Automotive Experience reported segment income of $121 million in the current quarter, compared with a loss of $219 million (excluding non-recurring items) last year due to higher volumes, operational efficiencies and higher profitability of its automotive joint ventures.
Power Solutions sales in the first quarter of 2010 increased 15% to $1.3 billion from $1.1 billion reflecting higher aftermarket and original equipment unit shipments. Aftermarket unit sales increased 9% due to new customers and improved markets. Higher global automotive production and incremental volume from customers resulted in a 19% increase in original equipment battery sales.
Power Solutions segment income was $181 million versus $40 million in the first quarter of 2009, which included a negative $50 million inventory valuation charge. The higher 2010 income is the result of the higher volumes, improved capacity utilization and operational efficiencies.
Johnson Controls said that in the first quarter it launched production of lithium-ion battery systems for the BMW 7-Series hybrid vehicle and was awarded a production contract to supply lithium-ion hybrid batteries for Ford's 2010 all-electric Transit van.
Building Efficiency sales in the 2010 first quarter were $3.0 billion, down 2% from $3.1 billion last year. Excluding the effect of currency, sales were down 8%. The lower sales reflect the late-cycle attributes of the building markets. Double-digit increases in Global Workplace Solutions sales and higher sales for energy efficiency solutions and residential HVAC were offset by declines in Western Europe and Latin America. Johnson Controls reported that its backlog of uncompleted contracts in the first quarter was $4.3 billion, down 8% versus the previous year. The company said its pipeline of potential new business improved in the quarter.
The Building Efficiency segment reported segment income of $104 million, down 21% compared to $131 million in 2009 (excluding non-recurring items) as a result of the lower volumes, new information technology implementation costs and increased investments in growth initiatives.
Johnson Controls updated its assumptions and earnings guidance for 2010.
-- 2010 revenues are now forecast to increase 16% to $33 billion versus
the previous forecast of $31 billion
-- Earnings per share for the 2010 fiscal year are now expected to total
$1.70 - $1.75 per diluted share compared to earlier guidance of $1.35
- $1.45 per diluted share
-- The company's expected underlying tax rate for 2010 is now 18% versus
the previous estimate of 20%
-- Automotive production assumption in North America is now 10.3 million
vehicles compared to an earlier estimate of 9.8 million
"Our markets are still well below their historic levels and the global economic environment remains challenging. We believe there will be meaningful improvements in our markets by the end of the fiscal year and we are well positioned to take advantage of the growth opportunities that will arise," Mr. Roell said. "We will continue to invest in our growth strategies and to further align with the global megatrends for improved energy efficiency and sustainability."
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 130,000 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 www.johnsoncontrols.com.
Johnson Controls, Inc. ("the Company") has made forward-looking statements in this presentation pertaining to its financial results for fiscal 2010 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 included terms such as "outlook," "expectations," "estimates," or "forecasts." For those statements, the Company cautions that numerous important factors, such as automotive vehicle production levels, mix and schedules, financial distress of key customers, energy prices, the strength of the U.S. or other economies, currency exchange rates, cancellation of or changes to commercial contracts, liquidity, changes in the levels or timing of investments in commercial buildings, the ability to execute on restructuring actions according to anticipated timelines and costs as well as other factors discussed in the Company's Form 8k (filed March 9, 2009) 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
December 31,
-------------------
2009 2008
---- ----
Net sales $8,408 $7,336
Cost of sales 7,172 6,651
----- -----
Gross profit 1,236 685
Selling, general and administrative expenses (883) (859)
Financing charges - net (35) (56)
Equity income (loss) 53 (136)
--- ----
Income (loss) from continuing operations
before income taxes 371 (366)
Provision for income taxes 5 242
--- ---
Net income (loss) 366 (608)
--- ----
Less: income attributable to noncontrolling
interests 16 -
Net income (loss) attributable to JCI $350 $(608)
==== =====
Diluted earnings (loss) per share $0.52 $(1.02)
===== ======
Diluted weighted average shares 681 594
=== ===
Shares outstanding at period end 672 594
=== ===
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions; unaudited)
December 31, September 30,
2009 2009
---- ----
ASSETS
Cash and cash equivalents $791 $761
Accounts receivable - net 5,154 5,528
Inventories 1,571 1,521
Other current assets 2,160 2,016
---- -----
Current assets 9,676 9,826
Property, plant and equipment - net 3,918 3,986
Goodwill - net 6,506 6,542
Other intangible assets - net 735 746
Investments in partially-owned affiliates 760 718
Other noncurrent assets 2,210 2,270
----- -----
Total assets $23,805 $24,088
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion of
long-term debt $367 $798
Accounts payable and accrued expenses 5,357 5,306
Other current liabilities 2,663 2,612
----- -----
Current liabilities 8,387 8,716
Long-term debt 3,077 3,168
Other noncurrent liabilities 2,785 2,865
Total equity attributable to JCI 9,353 9,138
Equity attributable to noncontrolling
interests 203 201
--- ---
Total liabilities and
shareholders' equity $23,805 $24,088
======= =======
December 31,
2008
----
ASSETS
Cash and cash equivalents $202
Accounts receivable - net 5,063
Inventories 1,935
Other current assets 1,517
-----
Current assets 8,717
Property, plant and equipment - net 4,115
Goodwill - net 6,392
Other intangible assets - net 757
Investments in partially-owned affiliates 703
Other noncurrent assets 1,620
-----
Total assets $22,304
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion of
long-term debt $1,437
Accounts payable and accrued expenses 4,583
Other current liabilities 2,521
-----
Current liabilities 8,541
Long-term debt 3,176
Other noncurrent liabilities 2,045
Total equity attributable to JCI 8,313
Equity attributable to noncontrolling
interests 229
---
Total liabilities and
shareholders' equity $22,304
=======
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
Three Months Ended December 31,
--------------------------------
2009 2008
---- ----
Operating Activities
Net income (loss)
attributable to JCI $350 $(608)
Income attributable to
noncontrolling
interests 16 -
--- ---
Net income (loss) 366 (608)
Adjustments to
reconcile net income
to cash provided
(used) by operating
activities:
Depreciation and
amortization 180 190
Equity in earnings of
partially-owned
affiliates, net of
dividends received (12) 32
Deferred income taxes (62) 300
Non-cash impairment of
long-lived assets - 110
Non-cash impairment of
equity investment - 152
Other - net 29 35
Changes in working
capital, excluding
acquisition and
divestiture
of businesses:
Receivables 352 1,128
Inventories (56) 78
Restructuring reserves (58) (52)
Accounts payable and
accrued liabilities 143 (1,656)
Change in other assets
and liabilities (74) (26)
--- ---
Cash provided (used) by
operating activities 808 (317)
--- ----
Investing Activities
Capital expenditures (177) (268)
Sale of property, plant
and equipment 19 3
Acquisition of
businesses, net of
cash acquired - (22)
Other - net (27) (70)
--- ---
Cash used by investing
activities (185) (357)
---- ----
Financing Activities
Increase (decrease) in
short and long-term
debt - net (524) 540
Payment of cash
dividends (77) (77)
Other - net 8 29
--- ---
Cash provided (used) by
financing activities (593) 492
---- ---
Increase (decrease) in
cash and cash
equivalents $30 $(182)
=== =====
FOOTNOTES
1. Business Unit Summary
Three Months Ended
December 31,
(in millions) (unaudited)
-----------
2009 2008 %
---- ---- ---
Net Sales
---------
Building efficiency $3,018 $3,087 -2%
Automotive experience 4,103 3,131 31%
Power solutions 1,287 1,118 15%
----- -----
Net Sales $8,408 $7,336
====== ======
Segment Income (1)
------------------
Building efficiency $104 $(21) *
Automotive experience 121 (329) *
Power solutions 181 40 *
--- ---
Segment Income (loss) $406 $(310)
==== =====
Financing charges - net (35) (56)
Income (loss) from continuing operations
before income taxes $371 $(366)
==== =====
Net Sales
---------
Products and systems $6,676 $5,647 18%
Services 1,732 1,689 3%
----- -----
$8,408 $7,336
====== ======
Cost of Sales
-------------
Products and systems $5,756 $5,273 9%
Services 1,416 1,378 3%
----- -----
$7,172 $6,651
====== ======
* Metric not meaningful
(1) Management evaluates the performance of the segments based
primarily on segment income, which represents income from continuing
operations before income taxes and minority interest, excluding net
financing charges and restructuring costs.
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.
2. Impairment Charges
The Company reviews long-lived assets, including property, plant and
equipment and other intangible assets with definite lives, for
impairment whenever events or changes in circumstances indicate that
its carrying amounts may not be recoverable. At December 31, 2008,
the Company recorded a $77 million and $33 million impairment charge
related to property, plant and equipment in the automotive
experience business in North America and Europe, respectively. The
impairment charge is included in cost of sales in the accompanying
Condensed Consolidated Statements of Income.
At December 31, 2008, the Company also recorded a $152 million charge
related to an impairment of an equity investment in a 48%-owned
joint venture with US Airconditioning Distributors, Inc. in the
Company's building efficiency business. This impairment charge is
included in equity loss in the accompanying Condensed Consolidated
Statements of Income.
3. Income Taxes
The Company's annual estimated effective tax rate before
consideration of discrete tax items for the year ending September
30, 2010 is 18 percent. The effective tax rate inclusive of
discrete tax items for the first quarter of fiscal 2010 is 1.3
percent, as compared to negative 66.1 percent for the first quarter
of fiscal 2009.
4. Earnings per Share
The following table reconciles the numerators and denominators used
to calculate basic and diluted earning per share (in millions):
Three Months
Ended
December 31,
------------
2009 2008
---- ----
(unaudited)
Income Available to Common Shareholders
Basic income (loss) available to common
shareholders $350 $(608)
Interest expense, net of tax 2 -
Diluted income (loss) available to common
shareholders $352 $(608)
==== =====
Weighted Average Shares Outstanding
Basic weighted average shares outstanding 670.6 593.5
Effect of dilutive securities:
Stock options 5.8 -
Convertible senior notes 0.1 -
Equity units 4.5 -
--- ---
Diluted weighted average shares outstanding 681.0 593.5
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