Johnson Controls on Friday reported record sales and operating income for the second quarter of fiscal 2007.
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Operating income rose 62% on a 4% increase in revenues. Earnings per share were $1.31 versus $0.83 last year.
The company today also increased its full fiscal-year outlook to reflect the benefits of a lower tax rate and improved operational efficiencies.
“We are pleased with our performance in the second quarter, which extends our track record for consistent, profitable growth. Our results also demonstrate how diversification helps us withstand short-term downturns in any single business or region,” said chairman and chief executive officer John Barth.
For the three months ended 31 March 2007, net sales increased 4% to a record $8.5bn from $8.2bn last year, reflecting higher building efficiency and power solutions revenues and the positive impact of foreign exchange, partially offset by lower automotive sales.
Income from continuing operations before income taxes and minority interests was $282m, 35% higher than the prior year’s $209m. The increase reflects higher volume and margin expansion by building efficiency and power solutions, partially offset by lower North American automotive results.
The effective tax rate in the second quarter was 6%, reflecting a cumulative reduction in the annual base effective tax rate to 21% from 23% as well as a $0.19 per share non-recurring tax benefit. In the 2006 second quarter, the effective tax rate was 17.3% (. The company expects the base effective tax rate for the remainder of fiscal 2007 to be 21%.
Income from continuing operations totaled $262m, an increase of 62% compared with $162m last year. Diluted earnings per share from continuing operations were $1.31 versus $0.83 last year. Excluding the impact of non-recurring tax benefits in both the 2007 and 2006 quarters, earnings per share from continuing operations increased 37% to $1.12 from $0.82.
Power solutions (batteries) sales were up 13% to $988m from $874m due to higher lead cost pass-throughs and favorable foreign currency. Unit shipments were slightly lower due to weaker European demand.
Segment income increased 21% to $93m from $77m in the second quarter of 2006. A higher mix of premium products and improved operational efficiencies overcame the negative effects of record high lead costs.
Automotive sales for the second quarter of fiscal 2007 totaled $4.5bn, 5% lower than in 2006 due primarily to lower North American volumes at most automakers. European sales increased primarily due to the favourable impact of foreign currency.
Industry light vehicle production in North America was 8% lower while European production is estimated to have been flat. Segment income decreased 20%, to $121m versus $152m in the prior year. Europe and Asia reported higher segment income, but the increases were more than offset by lower North American results.
North America’s second-quarter performance improved to break-even versus its first-quarter 2007 loss. The sequential improvement in North America resulted from operational efficiencies and lower launch costs.
The company increased its fiscal 2007 sales and earnings outlook and provided a forecast for third-quarter earnings.
In October 2006, Johnson Controls forecast that its diluted earnings per share from continuing operations for fiscal 2007 would increase 14% to approximately $6.00.
It now expects earnings per share from continuing operations to increase 19% – 20%, to $6.25 – $6.30, excluding the second quarter non-recurring tax benefit of $0.19 per share.
The change reflects the lower base effective tax rate of 21% and improved operational efficiencies. The company also raised its revenue guidance for the year from $34bn to approximately $34.5bn.
For the third quarter of 2007, the company anticipates diluted earnings per share from continuing operations of approximately $1.95, an increase of 15% over the third quarter of 2006.
“I am confident that Johnson Controls is on track to deliver another year of record revenues and earnings,” Barth said.
