Johnson Controls earned a record US$0.86 per share in continuing operations profit for the first quarter of fiscal 2006, an increase of 6% year on year.
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The interiors specialist also confirmed guidance for double-digit earnings growth for the full year.
Q1 2006
For the three months ended 31 December, 2005, sales increased 14% to a record $7.5 billion from $6.6 billion last year, reflecting organic growth by the vehicle interior and power solution businesses as well as revenues from the acquisitions of York and the Delphi battery business (effective July 2005).
Operating income was a record $231 million, an increase of 5% over $219 million for the prior year. Higher power solutions and European interior earnings were partially offset by lower North American interior results and costs associated with the York acquisition.
Excluding the impact of the York acquisition and foreign exchange, both sales and operating income increased 10% over the first quarter of fiscal 2005.
Net interest expense increased $18 million primarily due to the York acquisition.
The company recorded a one-time tax benefit of $16 million in the current quarter versus a $12 million benefit last year.
Income from continuing operations totaled $167 million, up 7% from $156 million in 2005.
Operating income increased 4%, to $36.9 million from $35.4 million including acquisition related costs.
Power solutions sales were up 35% to $976 million from $720 million due to increased unit shipments in the Americas and Europe as well as the impact of the Delphi battery acquisition. Operating income increased 17% to $109 million from $93 million, due to the higher volume and operational efficiencies. These increases were partially offset by higher lead costs, most of which are expected to be recovered in customer pricing.
Interior equipment sales for the first quarter of fiscal 2006 totaled $4.7 billion, up 5% over $4.5 billion in the 2005 period, primarily reflecting the launch of new programmes in North America, Europe and Asia.
Excluding the impact of foreign exchange, sales increased 9%.
Industry light vehicle production in North America was approximately 3% higher than the prior year amount while European production is estimated to have been 1% lower.
Operating income decreased 5%, to $86 million versus $91 million in the prior year as a substantial earnings improvement in the European business was more than offset by lower North American results reflecting higher commodity costs as well as costs associated with a customer’s recently announced restructuring plan.
Excluding the impact of foreign exchange, operating income increased 1%.
Total debt increased to $5.3 billion as a result of the funding of the York acquisition. The company’s total debt to total capitalisation at 30 December, 2005 was 46%, increasing from 28% at September 30, 2005.
2006 full year and Q2 outlook
The fiscal 2006 earnings outlook provided on 11 October, 2005 remains unchanged. The company forecasts that its diluted earnings per share from continuing operations for 2006 will be in a range of $5.00 to $5.15, with expected revenues of approximately $32 billion.
For the second quarter of 2006 the company anticipates sales of approximately $8 billion, a 16% increase over the second quarter of 2005, and diluted earnings per share from continuing operations of $0.73 to $0.75.
Johnson Controls chairman and chief executive officer John Barth said: “I am pleased to report that we have completed our first quarter in line with our plan.
“We are delivering on the expectations we set forth in October, and remain confident that 2006 will be another record year.”
