For the first quarter of fiscal 2011, Johnson Controls reported record sales and earnings with double-digit improvements by all three businesses. The company also increased its estimate for full fiscal year 2011 earnings.
Highlights of the company's first quarter of 2011 include:
- Record net sales of $9.5 billion vs. $8.4 billion in Q1 2010, up 13 percent
- Record income from business segments of $533 million vs. $406 million, up 31%
- Record net income of $375 million or $0.55 per diluted share compared with net income of $350 million, or $0.52 per diluted share in the 2010 first quarter. The year-ago quarter included a non-recurring tax benefit of $62 million. Excluding the non-recurring benefit, 2010 Q1 net income was $288 million, or $0.43 per diluted share. The company believes that using adjusted earnings numbers provides a more meaningful comparison of its underlying operating performance.
"Johnson Controls achieved record revenues and earnings despite the fact that our automotive and buildings markets are still far below historic norms," said Stephen A. Roell, Johnson Controls chairman and chief executive officer. "Our Automotive Experience and Power Solutions businesses have recovered over the past year and continue to improve. Building Efficiency sales and earnings increased at a double-digit pace with continued strong order and backlog rates. We now have solid momentum in all three of our businesses."
Business results
Automotive Experience sales in the quarter increased 12% to $4.6 billion versus $4.1 billion last year due primarily to higher production volumes and launches of new automotive seating and interior programs. Revenues increased 9% in North America where automotive production in the quarter increased 7%. European sales, excluding currency, were up 13% compared with a 6% production growth. Asia sales increased 49%, while revenues in China, which are mostly generated through non-consolidated joint ventures, increased 37% to $1.0 billion. Johnson Controls has 24 joint ventures in China operating 47 manufacturing plants. It holds a 45% share of the Chinese auto seating market.
Automotive Experience reported segment income of $177 million in the current quarter, up 46% compared with $121 million last year. The increase is due to higher volumes and higher profitability of its automotive joint ventures.
The recently announced acquisitions of Hammerstein and Keiper/Recaro are expected to close in the second and third fiscal quarters of 2011, respectively. Johnson Controls said that in 2011 the Hammerstein and Keiper/Recaro acquisitions are expected to contribute approximately $700 million in revenues and to be earnings per share (EPS) neutral, with earnings from the businesses being offset by higher interest expense. In addition, the company expects to incur acquisition and integration-related costs, which have not yet been quantified. In 2012, the acquisitions are forecast to generate approximately $1.4 billion in revenues and to be EPS accretive by approximately $0.10 per share.
Power Solutions sales in the first quarter of 2011 increased 21% to $1.6 billion from $1.3 billion reflecting higher aftermarket and original equipment unit shipments. Aftermarket unit sales increased 20% reflecting market share gains in North America and Europe. Higher automotive production contributed to a 17% increase in global original equipment battery sales.
Demand for the company's automotive batteries increased at a double-digit pace in China where Johnson Controls expects to expand its manufacturing capacity from four million units today to 30 million units by 2015. The company's second Chinese manufacturing plant has opened as scheduled in the second fiscal quarter of 2011. Johnson Controls will commence construction of its third Chinese plant, in Chongqing, next month.
Power Solutions segment income increased 20% to $217 million versus $181 million in the first fiscal quarter of 2010. The higher 2011 income is primarily the result of the higher volumes.
During the first quarter, the company's new battery recycling facility in Mexico began initial production as planned with full production expected by mid-year. In addition, the company said construction was progressing as expected on a new recycling facility in South Carolina. Upon completion of these facilities, Johnson Controls expects to be able to internally recycle approximately 50% of its North American lead requirements versus a historic level of approximately 15%.
Building Efficiency sales in the 2011 first quarter were $3.4 billion, up 13% from $3.0 billion last year. Sales were higher across all segments, led by a 31% increase in Asia and a 21% increase in Global Workplace Solutions. Shipments of chillers increased at a double-digit pace globally, with higher demand in all geographic regions. Johnson Controls reported that its backlog at December 31, 2010 was $4.9 billion, an increase of 13% over the prior year. In addition, orders received in the current quarter increased by 17% versus last year.
Building Efficiency segment income was $139 million, up 34% compared to $104 million in 2010 as a result of the higher volumes, with strong double-digit improvements in North America Systems, Global Workplace Solutions and Asia. Johnson Controls said that in the first quarter it increased investments to support growth initiatives by adding new sales force, energy engineers and service providers globally.
Increased sales, earnings guidance for 2011
Johnson Controls updated its assumptions and earnings guidance for 2011:
- 2011 revenues are now forecast to increase 12% over 2010 to $38.5 billion versus the previous forecast of $37 billion. The increased guidance is due to the impact of the European automotive acquisitions, higher automotive production in North America and Europe and higher Power Solutions aftermarket battery volumes.
- Automotive production assumption for fiscal 2011 in North America is now 12.5 million vehicles compared with the earlier estimate of 12.3 million. European automotive production forecast is now 18.3 million vehicles compared with the previous estimate of 17.6 million.
- Earnings per share for the 2011 fiscal year are now expected to total $2.50 - $2.55 per diluted share (excluding acquisition and integration related costs) compared to earlier guidance of $2.30 - $2.45 per diluted share. Johnson Controls expects its second quarter 2011 earnings to be $0.52 to $0.54 per diluted share, up more than 20% compared with the second quarter of 2010.
- Capital expenditures for 2011 are expected to total $1.4 billion versus earlier guidance of $1.2 billion. The increase reflects accelerated manufacturing capacity expansion in Power Solutions and capital expenditures associated with the recent automotive acquisitions.
"We are increasingly confident in our expectations for record results in 2011," said Roell. "As we look beyond 2011, we are using the strength of our balance sheet to accelerate near-term investments to achieve long-term, sustainable growth. We believe our recent acquisitions and higher levels of capital spending will enable us to consistently outperform our markets and increase shareholder value."
About Johnson Controls
Johnson Controls is a global diversified technology and industrial leader serving customers in more than 150 countries. Its 137,000 employees create quality products, services and solutions to optimize energy and operational efficiencies of buildings; lead-acid automotive batteries and advanced batteries for hybrid and electric vehicles; and interior systems for automobiles. The company's commitment to sustainability dates back to our roots in 1885, with the invention of the first electric room thermostat.
