EX-99.1 2 c57705exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
     
News release   (JOHNSON LOGO)
FOR IMMEDIATE RELEASE
         
CONTACT:
  Glen L. Ponczak (Investors)   April 23, 2010
 
  (414) 524-2375    
 
       
 
  Jacqueline F. Strayer (Media)    
 
  (414) 524-3876    
Johnson Controls Q2 2010 Revenues Increase 32% with Improved Profitability in All Three Businesses; Company Raises Earnings Forecast
MILWAUKEE, April 23, 2010 . . . For the second quarter of fiscal 2010, Johnson Controls reported a double-digit increase in sales with each of the company’s businesses reporting higher profitability. The company also increased its estimate for 2010 earnings.
“We are pleased with our second quarter results. Our automotive and power solutions businesses are executing very well on the higher production levels in North America and Europe. The Building Efficiency business has started to see signs of recovery with global orders increasing by 5% on a year-over-year basis,” said Stephen A. Roell, Johnson Controls Chairman and Chief Executive Officer. “Globally our markets are improving, and each of the businesses generated significant margin improvements through our focus on cost and quality. I want to thank our employees for their dedication and commitment to our customers.”
Highlights for the company’s second quarter of 2010 include:
n   Net sales of $8.3 billion vs. $6.3 billion in Q2 2009, up 32%
 
n   Income from business segments of $427 million compared with a Q2 2009 loss of $119 million
 
n   Net income of $274 million vs. a Q2 2009 loss of $193 million
 
n   Earnings per share of $0.40 vs. a Q2 2009 loss of $0.33
The 2010 quarter includes a non-cash tax charge of $18 million, or $0.03 per diluted share, associated with the recent U.S. health care reform legislation. The 2009 quarter included restructuring charges and other non-recurring items which negatively impacted earnings per diluted share by $0.17.

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News release   (JOHNSON LOGO)
Adjusting for the non-recurring items in both periods, the company’s results were as follows:
n   Income from business segments of $427 million compared with a Q2 2009 loss of $113 million
 
n   Net income of $292 million vs. a Q2 2009 loss of $97 million
 
n   Earnings per share of $0.43 vs. a Q2 2009 loss of $0.16
The company said it believes that using the adjusted numbers provides a more meaningful comparison of its underlying operating performance.
Automotive Experience sales in the quarter increased 70% to $4.2 billion versus $2.4 billion last year due primarily to higher production volumes and new program launches in all geographic regions. North American revenues increased 85% to $1.6 billion from $0.9 billion last year, while European sales were up 57% to $2.1 billion from $1.3 billion in the 2009 quarter. Sales in Asia increased to $430 million from $224 million in 2009 while China revenues, which are mostly generated through unconsolidated joint ventures, rose 91%. Johnson Controls has a 45% share of the Chinese automotive seating market.
Automotive Experience reported segment income of $189 million in the current quarter, compared with a loss of $269 million (excluding non-recurring items) last year due to higher volumes, operational efficiencies and significantly higher profitability of its automotive joint ventures. The North America segment margin of 6.7% reflects the benefits of our restructuring activities and increased production volumes. Asia segment margin, including the non-consolidated joint ventures in China, was also 6.7%. European segment margin was 2.4%, lower than other geographic regions due to the magnitude of new product launches.
Automotive production levels continue to recover in both North America and Europe due to the continued replenishment of auto dealer inventories as well as increasing consumer demand. As a result, Johnson Controls increased its forecasts for North American and European auto production in its 2010 fiscal year to 10.9 million units and 16.7 million units, respectively.
Power Solutions sales in the second quarter of 2010 increased 30% to $1.2 billion from $0.9 billion last year reflecting higher aftermarket and original equipment unit shipments. Aftermarket unit sales increased 9% due to new customers and improved markets. The company noted that incremental volume associated with the award of all of WalMart’s automotive battery business is expected to commence in the company’s fourth fiscal quarter. Higher global automotive production and incremental volume from new customers resulted in a 44% increase in original equipment battery sales.
Power Solutions segment income was $134 million versus $66 million in the second quarter of 2009. The higher 2010 income is the result of the higher volumes as well as improved capacity utilization associated with the completion of restructuring activities.
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News release   (JOHNSON LOGO)
The company is accelerating investments to expand lead acid battery production capacity in China. Due to rapid market expansion and share gains in the aftermarket sector, the company’s power business in China has the potential to be the size of its current European business within five years. Additionally, the construction of a new lead recycling facility in Mexico is proceeding as expected. The company also received one of the necessary permits related to construction of a lead recycling center in South Carolina. Increasing the in-house recycling of lead is expected to have a positive impact on margins over the next two years.
Building Efficiency sales in the 2010 second quarter were $3.0 billion, level with last year. Double-digit increases in Global Workplace Solutions sales and residential HVAC offset declines in Western Europe and North America. Johnson Controls reported that its second quarter orders increased by 5% globally and that its backlog of uncompleted contracts in the second quarter was $4.4 billion. The backlog was down 4% versus the previous year but improved versus the 2010 first quarter. In addition, the pipeline of potential new business was higher in the second quarter. The company saw increased demand in the educational, U.S. Federal government and energy efficiency solutions markets. Second quarter orders associated with the America Reinvestment and Recovery Act (ARRA) were $143 million. Johnson Controls noted that second quarter ARRA bookings were larger than the 2010 first quarter and fiscal 2009 bookings combined.
The Building Efficiency segment reported segment income of $104 million, up 16% compared to $90 million in 2009 with higher margins in all parts of the business except North American Service and Europe. Non-recurring charges in the 2010 quarter were comparable to those in the year-ago period.
Johnson Controls increased its earnings guidance for 2010:
n   Net sales expectation increased to $33.5 billion (up 18%) versus previous guidance of $33 billion (up 16%), with the impact of higher automotive production partially offset by a revised Euro assumption of $1.35
 
n   Segment margins for Automotive Experience increased to 3.1% — 3.3% from 2.0% — 2.2%. Power Solutions margins increased to 12.6% — 12.8%, previously 11.8% — 12.0%
 
n   Earnings per share for the 2010 fiscal year are now expected to total $1.90 — $1.95 per diluted share compared to earlier guidance of $1.70 — $1.75 per diluted share
 
n   Capital expenditures increased to $750 — $800 million from $700 - $750 million related to accelerated growth investments in Power Solutions
 
n   Free cash flow increased by $100 million to $1.3 billion
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News release   (JOHNSON LOGO)
“We continue to be encouraged by the steady improvement in the automotive industry and therefore have increased our earnings outlook for 2010,” Mr. Roell said. “In the first half of our fiscal year we have demonstrated the ability to capitalize on the higher production levels with strong execution occurring in all geographic regions. Strong cash flow from our operations has allowed us to accelerate our investments in growth initiatives across all of our businesses.”
###
Johnson Controls (NYSE: JCI) 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 http://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 Item 1A of Part I of the Company’s most recent Form 10-k filing (filed November 24, 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.
###
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April 23, 2010
Page 5
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
                 
    Three Months Ended March 31,  
    2010     2009  
Net sales
  $ 8,317     $ 6,315  
Cost of sales
    7,094       5,633  
 
           
Gross profit
    1,223       682  
 
               
Selling, general and administrative expenses
    (847 )     (803 )
Restructuring costs
          (230 )
Net financing charges
    (43 )     (46 )
Equity income
    51       2  
 
           
 
               
Income (loss) from continuing operations before income taxes
    384       (395 )
 
               
Provision (benefit) for income taxes
    87       (183 )
 
           
 
               
Net income (loss)
    297       (212 )
 
               
Less: income (loss) attributable to noncontrolling interests
    23       (19 )
 
           
 
               
Net income (loss) attributable to JCI
  $ 274     $ (193 )
 
           
 
               
Diluted earnings (loss) per share
  $ 0.40     $ (0.33 )
 
           
 
               
Diluted weighted average shares
    683       594  
 
           
Shares outstanding at period end
    673       594  
 
           

 


 

April 23, 2010
Page 6
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
                 
    Six Months Ended March 31,  
    2010     2009  
Net sales
  $ 16,725     $ 13,651  
Cost of sales
    14,266       12,284  
 
           
Gross profit
    2,459       1,367  
 
               
Selling, general and administrative expenses
    (1,730 )     (1,662 )
Restructuring costs
          (230 )
Net financing charges
    (78 )     (102 )
Equity income (loss)
    104       (134 )
 
           
Income (loss) from continuing operations before income taxes
    755       (761 )
 
               
Provision for income taxes
    92       59  
 
           
 
               
Net income (loss)
    663       (820 )
 
               
Less: income (loss) attributable to noncontrolling interests
    39       (19 )
 
           
 
               
Net income (loss) attributable to JCI
  $ 624     $ (801 )
 
           
 
               
Diluted earnings (loss) per share
  $ 0.92     $ (1.35 )
 
           
 
               
Diluted weighted average shares
    682       594  
 
           
Shares outstanding at period end
    673       594  
 
           

 


 

April 23, 2010
Page 7
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions; unaudited)
                         
    March 31,     September 30,     March 31,  
    2010     2009     2009  
ASSETS
                       
Cash and cash equivalents
  $ 770     $ 761     $ 311  
Accounts receivable — net
    5,431       5,528       4,745  
Inventories
    1,579       1,521       1,648  
Other current assets
    2,124       2,016       1,748  
 
                 
Current assets
    9,904       9,826       8,452  
 
                       
Property, plant and equipment — net
    3,779       3,986       3,949  
Goodwill
    6,377       6,542       6,320  
Other intangible assets — net
    709       746       749  
Investments in partially-owned affiliates
    770       718       668  
Other noncurrent assets
    2,270       2,270       1,586  
 
                 
Total assets
  $ 23,809     $ 24,088     $ 21,724  
 
                 
 
                       
LIABILITIES AND EQUITY
                       
Short-term debt and current portion of long-term debt
  $ 743     $ 798     $ 797  
Accounts payable and accrued expenses
    5,758       5,306       4,370  
Other current liabilities
    2,314       2,612       2,520  
 
                 
Current liabilities
    8,815       8,716       7,687  
 
                       
Long-term debt
    2,636       3,168       3,994  
Other noncurrent liabilities
    2,732       2,865       1,944  
Total equity attributable to JCI
    9,407       9,138       7,900  
Equity attributable to noncontrolling interests
    219       201       199  
 
                 
Total liabilities and equity
  $ 23,809     $ 24,088     $ 21,724  
 
                 

 


 

April 23, 2010
Page 8
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
                 
    Three Months Ended March 31,  
    2010     2009  
Operating Activities
               
Net income (loss) attributable to JCI
  $ 274     $ (193 )
Income (loss) attributable to noncontrolling interests
    23       (19 )
 
           
 
               
Net income (loss)
    297       (212 )
 
               
Adjustments to reconcile net income (loss) to cash provided by operating activities:
               
Depreciation and amortization
    176       191  
Equity in earnings of partially-owned affiliates, net of dividends received
    (32 )     27  
Deferred income taxes
    18       (78 )
Non-cash impairment of long-lived assets
    19       46  
Other — net
    33       7  
Changes in working capital, excluding acquisition of businesses:
               
Receivables
    (388 )     196  
Inventories
    (41 )     263  
Restructuring reserves
    (66 )     83  
Accounts payable and accrued liabilities
    233       (97 )
Change in other assets and liabilities
    (36 )     (244 )
 
           
Cash provided by operating activities
    213       182  
 
           
 
               
Investing Activities
               
Capital expenditures
    (134 )     (158 )
Sale of property, plant and equipment
    5        
Acquisition of businesses, net of cash acquired
    (15 )     (10 )
Other — net
    (41 )     (10 )
 
           
Cash used in investing activities
    (185 )     (178 )
 
           
 
               
Financing Activities
               
Increase (decrease) in short and long-term debt — net
    (45 )     194  
Payment of cash dividends
    (87 )     (77 )
Other — net
    83       (12 )
 
           
Cash provided (used) by financing activities
    (49 )     105  
 
           
 
               
Increase (decrease) in cash and cash equivalents
  $ (21 )   $ 109  
 
           

 


 

April 23, 2010
Page 9
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
                 
    Six Months Ended March 31,  
    2010     2009  
Operating Activities
               
Net income (loss) attributable to JCI
  $ 624     $ (801 )
Income (loss) attributable to noncontrolling interests
    39       (19 )
 
           
 
               
Net income (loss)
    663       (820 )
 
               
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
               
Depreciation and amortization
    356       381  
Equity in earnings of partially-owned affiliates, net of dividends received
    (44 )     59  
Deferred income taxes
    (44 )     222  
Non-cash impairment of long-lived assets
    19       156  
Non-cash impairment of equity investment
          152  
Other — net
    62       42  
Changes in working capital, excluding acquisition of businesses:
               
Receivables
    (36 )     1,324  
Inventories
    (97 )     341  
Restructuring reserves
    (124 )     31  
Accounts payable and accrued liabilities
    376       (1,753 )
Change in other assets and liabilities
    (110 )     (270 )
 
           
Cash provided (used) by operating activities
    1,021       (135 )
 
           
 
               
Investing Activities
               
Capital expenditures
    (311 )     (426 )
Sale of property, plant and equipment
    24       3  
Acquisition of businesses, net of cash acquired
    (15 )     (32 )
Other — net
    (68 )     (80 )
 
           
Cash used by investing activities
    (370 )     (535 )
 
           
 
               
Financing Activities
               
Increase (decrease) in short and long-term debt — net
    (569 )     734  
Payment of cash dividends
    (164 )     (154 )
Other — net
    91       17  
 
           
Cash provided (used) by financing activities
    (642 )     597  
 
           
 
               
Increase (decrease) in cash and cash equivalents
  $ 9     $ (73 )
 
           

 


 

April 23, 2010
Page 10
FOOTNOTES
1. Business Unit Summary
                                                 
    Three Months Ended     Six Months Ended  
    March 31,     March 31,  
    (unaudited)     (unaudited)  
(in millions)   2010     2009     %     2010     2009     %  
Net Sales
                                               
Building efficiency
  $ 2,973     $ 2,965       0 %   $ 5,991     $ 6,052       -1 %
Automotive experience
    4,166       2,445       70 %     8,269       5,576       48 %
Power solutions
    1,178       905       30 %     2,465       2,023       22 %
 
                                       
Net Sales
  $ 8,317     $ 6,315             $ 16,725     $ 13,651          
 
                                       
 
                                               
Segment Income (1)
                                               
Building efficiency
  $ 104     $ 90       16 %   $ 208     $ 69       *  
Automotive experience
    189       (275 )     *       310       (604 )     *  
Power solutions
    134       66       *       315       106       *  
 
                                       
Segment Income
  $ 427     $ (119 )           $ 833     $ (429 )        
 
                                       
 
                                               
Financing charges — net
    (43 )     (46 )             (78 )     (102 )        
Restructuring costs
          (230 )                   (230 )        
 
                                       
Income from continuing operations before income taxes and noncontrolling interests
  $ 384     $ (395 )           $ 755     $ (761 )        
 
                                       
 
                                               
Net Sales
                                               
Products and systems
  $ 6,642     $ 4,717       41 %   $ 13,318     $ 10,364       29 %
Services
    1,675       1,598       5 %     3,407       3,287       4 %
 
                                       
 
  $ 8,317     $ 6,315             $ 16,725     $ 13,651          
 
                                       
 
                                               
Cost of Sales
                                               
Products and systems
  $ 5,715     $ 4,362       31 %   $ 11,471     $ 9,635       19 %
Services
    1,379       1,271       8 %     2,795       2,649       6 %
 
                                       
 
  $ 7,094     $ 5,633             $ 14,266     $ 12,284          
 
                                       
 
*   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 noncontrolling interests, 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. Restructuring Costs
As part of its continuing efforts to reduce costs and improve the efficiency of its global operations, the Company announced a restructuring plan in the second quarter of fiscal year 2009 and recorded a $230 million restructuring charge. This restructuring charge included a $46 million impairment charge of which $25 million related to the North America automotive experience segment, $16 million related to the Asia automotive experience segment and $5 million related to the Europe automotive experience segment.
The restructuring charge relates to cost reduction initiatives in its automotive experience, building efficiency and power solutions businesses and includes workforce reductions and plant consolidations. The Company expects to substantially complete the initiatives in 2010. The automotive-related restructuring is in response to the fundamentals of the European, North American and Japanese automotive markets. The actions target reductions in the company’s cost base by decreasing excess manufacturing capacity due to lower industry production and the continued movement of vehicle production to low-cost countries, especially in Europe. Power solutions’ actions are focused on optimizing its regional manufacturing capacity to reflect lower overall demand for original equipment batteries resulting from lower vehicle production levels.
3. 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 March 31, 2010, the Company recorded a $19 million impairment charge related to property, plant and equipment in the North America automotive experience segment as part of the Company’s revised restructuring actions. This impairment charge was offset by a decrease in the Company’s restructuring reserve for $19 million due to lower employee severance and termination benefit cash payouts than previously calculated.
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 charges are 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.

 


 

April 23, 2010
Page 11
4. 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 second quarter of fiscal 2010 is 22.7 percent, as compared to 46.3 percent for the second quarter of fiscal 2009.
5. 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     Six Months Ended  
    March 31     March 31  
    2010     2009     2010     2009  
    (unaudited)     (unaudited)  
Income Available to Common Shareholders
                               
 
                               
Basic income (loss) available to common shareholders
  $ 274     $ (193 )   $ 624     $ (801 )
 
Financing costs related to the convertible senior notes and Equity Units, net of tax
    1             4        
 
 
                       
Diluted income (loss) available to common shareholders
  $ 275     $ (193 )   $ 628     $ (801 )
 
                       
 
                               
Weighted Average Shares Outstanding
                               
Basic weighted average shares outstanding
    671.7       593.6       671.1       593.5  
Effect of dilutive securities:
                               
Stock options
    6.3             6.1        
Convertible senior notes
    0.1             0.1        
Equity units
    4.5             4.5        
 
                       
Diluted weighted average shares outstanding
    682.6       593.6       681.8       593.5