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Johnson Controls Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 5, 2009 11:05PM
Johnson Controls Inc. (JCI) filed Quarterly Report for the period ended 2008-12-31.
Highlight of Business Operations:
The Companys debt financial covenants require a minimum consolidated stockholders equity of at least $1.31 billion at all times and allow a maximum aggregated amount of 10% of consolidated stockholders equity for liens and pledges. For purposes of calculating the Companys covenants, consolidated stockholders equity is calculated without giving effect to (i) the application of SFAS No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions or (ii) the cumulative foreign currency translation adjustment. As of December 31, 2008, consolidated stockholders equity as defined per our covenants was $7.9 billion and there were no outstanding amounts for liens and pledges. The Company expects to be in compliance with all covenants and other requirements set forth in its credit agreements and indentures in the foreseeable future. None of the Companys debt agreements limit access to stated borrowing levels or require accelerated repayment in the event of a decrease in the Companys credit rating.
The key financial assumptions used in calculating the pension liability are determined annually, or whenever plan assets and liabilities are re-measured as required under accounting principles generally accepted in the U.S., including the expected rate of return on our plan assets. Our most recent actuarial valuation utilized an expected rate of return of 8.5% and 5.5% for U.S. and non-U.S. plans, respectively. Given the recent credit market crisis and losses in equity markets, the Company anticipates the actual rate of return will likely be well below this rate in fiscal 2009. However, we still believe the long-term rate of return will approximate 8.5% and 5.5% for U.S. and non-U.S. plans, respectively. Any differences between actual results and the expected long-term asset returns will be reflected in other comprehensive income and amortized to pension expense in future years. The Companys U.S. minimum funding requirement for the remainder of fiscal 2009, and through the first quarter of fiscal 2010, is approximately $21 million per quarter. The Company also monitors its non-U.S. plans funded status and meets all minimum funding requirements. The Company is reviewing the annual incremental funding requirements for its non-U.S. plans resulting from the recent global equity market performance to determine if additional funding is required. During the first quarter of fiscal 2009, the Company made incremental discretionary pension contributions of approximately $75 million.
Building efficiencys backlog relates to its control systems and service activity. At December 31, 2008, the unearned backlog was $4.7 billion, compared to $4.4 billion at December 31, 2007, a 7% increase.