Johnson Controls has reported record results for the second quarter of fiscal 2006 and increased its full-year earnings outlook.
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For the three months ended 31 March, 2006, sales increased 18% to a record $US8.2bn from $6.9bn 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 $315m.
Operating income was a record $266m versus $43m which was reduced by a 2005 restructuring charge of $210m. 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%.
Chairman and chief executive officer John 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.”
Income from continuing operations in the current quarter was $162m versus $54m in the prior year. Diluted earnings per share from continuing operations were $0.83 compared with $0.28 in the prior year.
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 $162m compares with $165m 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.
Interior sales for the second quarter of 2006 totalled $4.8bn, approximately level with sales in 2005 while operating income was $135m, 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 $874m from $680m 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 $75m from $66m 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.
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 $32bn.
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.
The company said it expects a continued strong performance by its European interiors and power solutions businesses in the second half.
