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8-K - FORM 8-K - JOHNSON CONTROLS INC | c60938e8vk.htm |
EX-99.2 - EX-99.2 - JOHNSON CONTROLS INC | c60938exv99w2.htm |
Exhibit 99.1
News release |
FOR IMMEDIATE RELEASE
CONTACT:
|
Glen L. Ponczak (Investors) (414) 524-2375 Jacqueline F. Strayer (Media) (414) 524-3876 |
October 26, 2010 |
Johnson Controls Reports Double-Digit Sales and Earnings Increases for 2010 Fourth Quarter;
Affirms Forecast for Record Earnings in Fiscal 2011
Affirms Forecast for Record Earnings in Fiscal 2011
MILWAUKEE, October 26, 2010 . . . Johnson Controls today reported double-digit increases in fiscal
2010 fourth quarter net sales and income.
Highlights for the companys fourth quarter of 2010 include:
§ | Net sales of $9.0 billion vs. $7.9 billion in Q4 2009, up 15% | |
§ | Income from business segments of $604 million compared with $409 million a year ago | |
§ | Net income of $449 million vs. $300 million in Q4 2009 | |
§ | Diluted earnings per share of $0.66 vs. $0.47 last year |
Excluding non-recurring items, results were
§ | Income from business segments of $586 million compared with $514 million a year ago | |
§ | Net income of $409 million vs. $339 million in Q4 2009 | |
§ | Diluted earnings per share of $0.60 vs. $0.52 last year, up 15% |
Both the 2010 and 2009 fourth quarters included non-recurring items that are detailed in the
Footnotes of the accompanying financial statements. Johnson Controls said it believes that using
the adjusted numbers provide a more meaningful comparison of its underlying operating performance.
We continued to capitalize on the improvement in our markets in the fourth quarter while
gaining share and expanding in key geographic markets. In addition, we continue to benefit from the
growth investments we maintained through the economic downturn and from our improved cost
structure, said Johnson Controls Chairman and CEO Steve Roell.
Business results (excluding items, see Footnotes)
Page 1
News release |
Automotive Experience sales in the quarter increased 18% to $4.1 billion versus $3.5 billion last
year due primarily to higher industry production volumes and new program launches. North American
revenues increased 32% to $1.8 billion from $1.4 billion last year. North American industry
production rose 27%. European sales were slightly lower than the 2009 quarter at $1.8 billion due
to the negative impact of foreign currency. Excluding the impact of currency, European sales
increased 8%. Sales in Asia increased 74% to $563 million from $323 million in 2009. China
revenues, which are mostly generated through unconsolidated joint ventures and are not included in
the Asia consolidated sales figures, rose 41% to $875 million compared with $621 million a year
ago.
Johnson Controls announced that its backlog of net new business for 2011 2013 increased 60% to $4
billion, compared with a backlog of $2.5 billion for 2010 2012. The higher backlog reflects
market share gains in seating and interior systems, particularly in Europe and China.
Automotive Experience segment income totaled $129 million in the current quarter, compared with $77
million last year due to higher volumes, operational efficiencies and higher profitability of its
Chinese joint ventures. The company reported strong margin growth in North America and Asia.
Margins were lower in Europe due to the negative impact of foreign currency and higher engineering
costs.
Power Solutions sales in the fourth quarter of 2010 increased 19% to $1.3 billion from $1.1 billion
last year reflecting higher aftermarket and original equipment unit shipments as well as the
volumes associated with the consolidation of a Korean joint venture. Aftermarket unit shipments
increased 12%. The increase was primarily due to incremental volume from Wal-Mart and growth in
China where volumes were more than twice the prior year. Higher global automotive production
resulted in a 19% increase in original equipment battery shipments worldwide.
Power Solutions segment income was $182 million versus an exceptionally strong $194 million in the
fourth quarter of 2009. The year-ago quarter was favorably impacted by the magnitude and timing of
lead purchases as well as product mix.
Johnson Controls said it started production at a new battery recycling facility in Mexico in
October 2010 as planned and expects to be at full production by June 2011. In addition, the company
said construction has begun on a new recycling facility in South Carolina. Upon completion of these
facilities, Johnson Controls expects to be able to internally recycle more than 50% of its lead
requirements versus 15% today.
Earlier this month, the company announced plans to further expand production capacity in China
through the construction of a third manufacturing plant. The company also announced it had signed
an agreement to form a joint venture to produce and sell lead acid batteries in the fast-developing
emerging markets in Central and South America.
Page 2
News release |
Building Efficiency sales in the 2010 fourth quarter were $3.6 billion, up 10% compared with last
year reflecting increased demand for its energy efficiency solutions. Revenues were higher in all
segments except Europe, which declined 12% due to the continued weakness in construction spending
and deferrals of discretionary maintenance and retrofit projects. Johnson Controls reported that
its fourth quarter backlog increased 10% to $4.7 billion. Orders increased by 32% globally,
excluding currency.
In the fourth quarter, Verizon announced it selected Johnson Controls to provide integrated
facility management, project management, energy implementation, lease administration and
transaction management services at over 7,000 of Verizons U.S. properties. During the quarter, the
company also announced it had signed its single-largest order for York chillers and related HVAC
equipment to be used in a retrofit project in the Middle East.
Building Efficiency reported segment income of $275 million, up 13% versus the 2009 quarter as a
result of the higher volumes.
Johnson Controls said that due to the strength of its balance sheet, the company made a voluntary
pension contribution of approximately $440 million in the fourth quarter. It also reported that its
net debt to total capitalization ratio at the end of the quarter was 21.9%.
Full-year results
For the 2010 fiscal year, Johnson Controls sales increased 20% to $34.3 billion compared with $28.5
billion for 2009. Financial results for the 2010 fiscal year are included in the Consolidated
Statements of Income.
2011 Outlook
Johnson Controls today affirmed the 2011 financial guidance it issued on October 12, 2010. Johnson
Controls anticipates a sales increase of 9%, to approximately $37 billion. The 2011 expectations
are the result of a global market recovery in its buildings business, modestly higher automotive
production levels and growth across the businesses in emerging markets, as well as market share
gains. Earnings are forecast to increase to approximately $2.30 $2.45 per diluted share. Sales,
earnings and margin improvements are expected in all three of its businesses in 2011.
We have good momentum as we begin fiscal 2011 as evidenced by our strong financial performance in
the fourth quarter of 2010 and the substantial increases in our automotive and buildings backlogs.
Our objective is to consistently grow at twice the rate of our underlying markets, Mr. Roell said.
With our strong balance sheet and cash flows, we are accelerating our investments ahead of the
recoveries of our markets to take advantage of growth opportunities and to further grow our share.
I believe Johnson Controls is well-positioned to deliver record earnings in 2011 and sustainable,
profitable growth over the long-term.
Page 3
News release |
Johnson Controls, Inc. has made forward-looking statements in this document pertaining to its
financial results for fiscal 2011 and beyond that are based on preliminary data and are subject to
risks and uncertainties. All statements, other than statements of historical fact, are statements
that are, or could be, deemed forward-looking statements and include terms such as outlook,
expectations, estimates or forecasts. For those statements, the Company cautions that
numerous important factors, such as automotive vehicle production levels, mix and schedules, energy
and commodity prices, the strength of the U.S. or other economies, currency exchange rates,
cancellation of or changes to commercial contracts, changes in the levels or timing of investments
in commercial buildings as well as other factors discussed in Item 1A of Part I of the Companys
most recent Form 10-k filing (filed November 24, 2009) could affect the Companys actual results
and could cause its actual consolidated results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company.
###
Johnson Controls is a global diversified technology and industrial leader serving customers
in over 150 countries. Our 130,000 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. Our
commitment to sustainability dates back to our roots in 1885, with the invention of the first
electric room thermostat. Through our growth strategies and by increasing market share we are
committed to delivering value to shareholders and making our customers successful.
###
Page 4
Johnson Controls
October 26, 2010
Page 5
October 26, 2010
Page 5
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
(in millions, except per share data; unaudited)
Three Months Ended September 30, | ||||||||
2010 | 2009 | |||||||
Actual | Actual | |||||||
Net sales |
$ | 9,040 | $ | 7,867 | ||||
Cost of sales |
7,549 | 6,724 | ||||||
Gross profit |
1,491 | 1,143 | ||||||
Selling, general and administrative expenses |
(985 | ) | (761 | ) | ||||
Debt conversion costs |
| (111 | ) | |||||
Net financing charges |
(53 | ) | (72 | ) | ||||
Equity income |
98 | 27 | ||||||
Income from continuing operations before income taxes |
551 | 226 | ||||||
Provision (benefit) for income taxes |
74 | (77 | ) | |||||
Net income |
477 | 303 | ||||||
Less: income attributable to noncontrolling interests |
28 | 3 | ||||||
Net income attributable to JCI |
$ | 449 | $ | 300 | ||||
Diluted earnings per share |
$ | 0.66 | $ | 0.47 | ||||
Diluted weighted average shares |
683 | 679 | ||||||
Shares outstanding at period end |
674 | 671 | ||||||
Johnson Controls
October 26, 2010
Page 6
October 26, 2010
Page 6
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
(in millions, except per share data; unaudited)
Twelve Months Ended September 30, | ||||||||
2010 | 2009 | |||||||
Actual | Actual | |||||||
Net sales |
$ | 34,305 | $ | 28,497 | ||||
Cost of sales |
29,016 | 24,948 | ||||||
Gross profit |
5,289 | 3,549 | ||||||
Selling, general and administrative expenses |
(3,610 | ) | (3,210 | ) | ||||
Restructuring costs |
| (230 | ) | |||||
Debt conversion costs |
| (111 | ) | |||||
Net financing charges |
(170 | ) | (239 | ) | ||||
Equity income (loss) |
254 | (77 | ) | |||||
Income (loss) from continuing operations before income taxes |
1,763 | (318 | ) | |||||
Provision for income taxes |
197 | 32 | ||||||
Net income (loss) |
1,566 | (350 | ) | |||||
Less: income (loss) attributable to noncontrolling interests |
75 | (12 | ) | |||||
Net income (loss) attributable to JCI |
$ | 1,491 | $ | (338 | ) | |||
Diluted earnings (loss) per share |
$ | 2.19 | $ | (0.57 | ) | |||
Diluted weighted average shares |
683 | 595 | ||||||
Shares outstanding at period end |
674 | 671 | ||||||
Johnson Controls
October 26, 2010
Page 7
October 26, 2010
Page 7
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions; unaudited)
(in millions; unaudited)
September 30, | September 30, | |||||||
2010 | 2009 | |||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 560 | $ | 761 | ||||
Accounts receivable net |
6,095 | 5,528 | ||||||
Inventories |
1,786 | 1,521 | ||||||
Other current assets |
2,097 | 2,016 | ||||||
Current assets |
10,538 | 9,826 | ||||||
Property, plant and equipment net |
4,096 | 3,986 | ||||||
Goodwill |
6,501 | 6,542 | ||||||
Other intangible assets net |
741 | 746 | ||||||
Investments in partially-owned affiliates |
728 | 718 | ||||||
Other noncurrent assets |
3,012 | 2,270 | ||||||
Total assets |
$ | 25,616 | $ | 24,088 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Short-term debt and current portion of long-term debt |
$ | 737 | $ | 798 | ||||
Accounts payable and accrued expenses |
6,548 | 5,306 | ||||||
Other current liabilities |
2,494 | 2,612 | ||||||
Current liabilities |
9,779 | 8,716 | ||||||
Long-term debt |
2,652 | 3,168 | ||||||
Other noncurrent liabilities |
2,794 | 2,865 | ||||||
Redeemable noncontrolling interests |
196 | 155 | ||||||
Shareholders equity attributable to JCI |
10,089 | 9,100 | ||||||
Noncontrolling interests |
106 | 84 | ||||||
Total liabilities and equity |
$ | 25,616 | $ | 24,088 | ||||
Johnson Controls
October 26, 2010
Page 8
October 26, 2010
Page 8
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
(in millions; unaudited)
Three Months Ended September 30, | ||||||||
2010 | 2009 | |||||||
Operating Activities |
||||||||
Net income attributable to JCI |
$ | 449 | $ | 300 | ||||
Income attributable to noncontrolling interests |
28 | 3 | ||||||
Net income |
477 | 303 | ||||||
Adjustments to reconcile net income to cash provided by operating activities: |
||||||||
Depreciation and amortization |
167 | 184 | ||||||
Equity in earnings of partially-owned affiliates, net of dividends received |
43 | 30 | ||||||
Deferred income taxes |
15 | (196 | ) | |||||
Debt conversion costs |
| 101 | ||||||
Impairment charges |
11 | | ||||||
Fair value adjustment of equity investment |
(47 | ) | | |||||
Other net |
33 | 11 | ||||||
Changes in working capital, excluding acquisitions
of businesses: |
||||||||
Accounts receivable |
(390 | ) | (501 | ) | ||||
Inventories |
(52 | ) | 81 | |||||
Restructuring reserves |
(39 | ) | (61 | ) | ||||
Accounts payable and accrued liabilities |
(377 | ) | 1,031 | |||||
Change in other assets and liabilities |
225 | (425 | ) | |||||
Cash provided by operating activities |
66 | 558 | ||||||
Investing Activities |
||||||||
Capital expenditures |
(251 | ) | (118 | ) | ||||
Sale of property, plant and equipment |
13 | 20 | ||||||
Acquisition of businesses, net of cash acquired |
(29 | ) | (6 | ) | ||||
Other net |
(46 | ) | (50 | ) | ||||
Cash used by investing activities |
(313 | ) | (154 | ) | ||||
Financing Activities |
||||||||
Increase (decrease) in short and long-term debt net |
(12 | ) | 1 | |||||
Payment of cash dividends |
(88 | ) | (78 | ) | ||||
Debt conversion costs |
| (101 | ) | |||||
Other net |
(1 | ) | (8 | ) | ||||
Cash used by financing activities |
(101 | ) | (186 | ) | ||||
Increase (decrease) in cash and cash equivalents |
$ | (348 | ) | $ | 218 | |||
Johnson Controls
October 26, 2010
Page 9
October 26, 2010
Page 9
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
(in millions; unaudited)
Twelve Months Ended September 30, | ||||||||
2010 | 2009 | |||||||
Operating Activities |
||||||||
Net income (loss) attributable to JCI |
$ | 1,491 | $ | (338 | ) | |||
Income (loss) attributable to noncontrolling interests |
75 | (12 | ) | |||||
Net income (loss) |
1,566 | (350 | ) | |||||
Adjustments to reconcile net income (loss) to cash provided by operating activities: |
||||||||
Depreciation and amortization |
691 | 745 | ||||||
Equity in earnings of partially-owned affiliates, net of dividends received |
5 | 85 | ||||||
Deferred income taxes |
(80 | ) | 6 | |||||
Debt conversion costs |
| 101 | ||||||
Impairment charges |
41 | 156 | ||||||
Fair value adjustment of equity investment |
(47 | ) | | |||||
Non-cash impairment of equity investment |
| 152 | ||||||
Other net |
112 | 100 | ||||||
Changes in working capital, excluding acquisition and divestiture
of businesses: |
||||||||
Accounts receivable |
(608 | ) | 796 | |||||
Inventories |
(260 | ) | 557 | |||||
Restructuring reserves |
(195 | ) | (83 | ) | ||||
Accounts payable and accrued liabilities |
218 | (635 | ) | |||||
Change in other assets and liabilities |
71 | (713 | ) | |||||
Cash provided by operating activities |
1,514 | 917 | ||||||
Investing Activities |
||||||||
Capital expenditures |
(777 | ) | (647 | ) | ||||
Sale of property, plant and equipment |
47 | 28 | ||||||
Acquisition of businesses, net of cash acquired |
(61 | ) | (38 | ) | ||||
Other net |
(177 | ) | (171 | ) | ||||
Cash used by investing activities |
(968 | ) | (828 | ) | ||||
Financing Activities |
||||||||
Increase (decrease) in short and long-term debt net |
(586 | ) | 705 | |||||
Payment of cash dividends |
(339 | ) | (309 | ) | ||||
Debt conversion costs |
| (101 | ) | |||||
Other net |
178 | (7 | ) | |||||
Cash provided (used) by financing activities |
(747 | ) | 288 | |||||
Increase (decrease) in cash and cash equivalents |
$ | (201 | ) | $ | 377 | |||
Johnson Controls
October 26, 2010
Page 10
October 26, 2010
Page 10
FOOTNOTES
1. Business Unit Summary
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||
(in millions) | 2010 | 2009 | % | 2010 | 2009 | % | ||||||||||||||||||
Net Sales |
||||||||||||||||||||||||
Building Efficiency |
$ | 3,594 | $ | 3,274 | 10 | % | $ | 12,802 | $ | 12,493 | 2 | % | ||||||||||||
Automotive Experience |
4,128 | 3,484 | 18 | % | 16,610 | 12,016 | 38 | % | ||||||||||||||||
Power Solutions |
1,318 | 1,109 | 19 | % | 4,893 | 3,988 | 23 | % | ||||||||||||||||
Net Sales |
$ | 9,040 | $ | 7,867 | $ | 34,305 | $ | 28,497 | ||||||||||||||||
Segment Income (2) |
||||||||||||||||||||||||
Building Efficiency |
$ | 275 | $ | 138 | 99 | % | $ | 673 | $ | 397 | 70 | % | ||||||||||||
Automotive Experience |
110 | 77 | 43 | % | 591 | (541 | ) | * | ||||||||||||||||
Power Solutions |
219 | 194 | 13 | % | 669 | 406 | 65 | % | ||||||||||||||||
Segment Income |
$ | 604 | (1) | $ | 409 | (1) | $ | 1,933 | $ | 262 | ||||||||||||||
Restructuring costs |
| | | (230 | ) | |||||||||||||||||||
Debt conversion costs |
| (111 | ) | | (111 | ) | ||||||||||||||||||
Net financing charges |
(53 | ) | (72 | ) | (170 | ) | (239 | ) | ||||||||||||||||
Income from continuing operations before
income taxes and noncontrolling interests |
$ | 551 | $ | 226 | $ | 1,763 | $ | (318 | ) | |||||||||||||||
Net Sales |
||||||||||||||||||||||||
Products and systems |
$ | 7,088 | $ | 6,169 | 15 | % | $ | 27,204 | $ | 21,837 | 25 | % | ||||||||||||
Services |
1,952 | 1,698 | 15 | % | 7,101 | 6,660 | 7 | % | ||||||||||||||||
$ | 9,040 | $ | 7,867 | $ | 34,305 | $ | 28,497 | |||||||||||||||||
Cost of Sales |
||||||||||||||||||||||||
Products and systems |
$ | 5,972 | $ | 5,375 | 11 | % | $ | 23,226 | $ | 19,618 | 18 | % | ||||||||||||
Services |
1,577 | 1,349 | 17 | % | 5,790 | 5,330 | 9 | % | ||||||||||||||||
$ | 7,549 | $ | 6,724 | $ | 29,016 | $ | 24,948 | |||||||||||||||||
* | Metric not meaningful | |
(1) | These reported numbers include a $0.02 per share after tax effect of non-recurring items and net valuation allowance releases in income taxes of $0.04 per share. The pre-tax non-recurring items are reported in the segments as follows: |
Automotive Experience | Building Efficiency | Power Solutions | Consolidated JCI | |||||||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
Segment income, as reported |
$ | 110 | $ | 77 | $ | 275 | $ | 138 | $ | 219 | $ | 194 | $ | 604 | $ | 409 | ||||||||||||||||
Non-recurring items: |
||||||||||||||||||||||||||||||||
Impairment charges |
11 | | | | | | 11 | | ||||||||||||||||||||||||
Warranty charges |
| | | 105 | | | | 105 | ||||||||||||||||||||||||
Equity affiliate (gains) losses |
8 | | | | (37 | ) | | (29 | ) | | ||||||||||||||||||||||
Segment income, excluding
one-time items |
$ | 129 | $ | 77 | $ | 275 | $ | 243 | $ | 182 | $ | 194 | $ | 586 | $ | 514 | ||||||||||||||||
(2) | Management evaluates the performance of the segments based primarily on segment income, which represents income from continuing operations before income taxes and noncontrolling interests, excluding net financing charges and restructuring costs. |
Building efficiency Provides facility systems and services including comfort, energy and security
management for the non-residential buildings market and provides heating, ventilating, and air
conditioning products and services for the residential and non-residential building markets.
Automotive experience Designs and manufactures interior systems and products for passenger cars
and light trucks, including vans, pick-up trucks and sport/crossover utility vehicles.
Power solutions Services both automotive original equipment manufacturers and the battery
aftermarket by providing advanced battery technology, coupled with systems engineering, marketing
and service expertise.
2. Acquisitions
In July of fiscal 2010, the Company acquired an additional 40 percent of a Korean joint venture.
The acquisition increased the Companys ownership percentage to 90 percent. The Company paid
approximately $86 million (excluding cash acquired of $57 million) for the additional ownership
percentage and incurred approximately $10 million of acquisition costs and related purchase
accounting adjustments. As a result of the acquisition, the Company recorded a non-cash gain of $47
million to adjust the Companys existing equity investment to fair value.
3. Restructuring Costs
As part of its continuing efforts to reduce costs and improve the efficiency of its global
operations, the Company announced restructuring plans in the second quarter of fiscal year 2009 and
recorded a $230 million restructuring charge. This restructuring charge included a $46 million
impairment charge of which $25 million related to the North America automotive experience segment,
$16 million related to the Asia automotive experience segment, and $5 million related to the Europe
automotive experience segment.
The restructuring charge related to cost reduction initiatives in its automotive experience,
building efficiency and power solutions businesses and included workforce reductions and plant
consolidations. The Company expects to substantially complete the initiatives in 2011.
Johnson Controls
October 26, 2010
Page 11
October 26, 2010
Page 11
4. Impairment Charges
The Company reviews long-lived assets, including property, plant and equipment and other intangible
assets with definite lives, for impairment whenever events or changes in circumstances indicate
that its carrying amounts may not be recoverable.
At September 30, 2010, the Company recorded an $11 million impairment charge related to property,
plant and equipment in the Asia automotive experience segment. This impairment charge is included
in cost of sales in the accompanying Condensed Consolidated Statements of Income.
At June 30, 2010, the Company recorded an $11 million impairment charge related to property, plant
and equipment in the Asia automotive experience segment. This impairment charge is included in
selling, general and administrative expenses in the accompanying Condensed Consolidated Statements
of Income.
At March 31, 2010, the Company recorded a $19 million impairment charge related to property, plant
and equipment in the North America automotive experience segment as part of the Companys revised
restructuring actions. This impairment charge was offset by a decrease in the Companys
restructuring reserve for $19 million due to lower employee severance and termination benefit cash
payouts than previously calculated.
At December 31, 2008, the Company recorded a $77 million and $33 million impairment charge related
to property, plant and equipment in the automotive experience business in North America and Europe,
respectively. The impairment charges are included in cost of sales in the accompanying Condensed
Consolidated Statements of Income. At December 31, 2008, the Company also recorded a $152 million
charge related to an impairment of an equity investment in a 48%-owned joint venture with US
Airconditioning Distributors, Inc. in the Companys building efficiency business. This impairment
charge is included in equity loss in the accompanying Condensed Consolidated Statements of Income.
5. Income Taxes
The Companys effective tax rate before consideration of discrete tax items for the fourth quarter
and year ending September 30, 2010 is 18.0 percent as compared to 22.7 percent for the fourth
quarter and year ending September 30, 2009. The effective tax rate inclusive of discrete tax items
for the fourth quarter and year ending September 30, 2010 is 13.4 percent and 11.2 percent,
respectively. The impact of net valuation allowance releases is $0.04 per share in the fourth
quarter.
6. Earnings per Share
The following table reconciles the numerators and denominators used to calculate basic and diluted
earning per share (in millions):
Three Months Ended | Twelve Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Income Available to Common Shareholders |
||||||||||||||||
Basic income (loss) available to common
shareholders |
$ | 449 | $ | 300 | $ | 1,491 | $ | (338 | ) | |||||||
Financing costs related to the convertible
senior notes and equity units, net of tax |
1 | 18 | 5 | | ||||||||||||
Diluted income (loss) available to common
shareholders |
$ | 450 | $ | 318 | $ | 1,496 | $ | (338 | ) | |||||||
Weighted Average Shares Outstanding |
||||||||||||||||
Basic weighted average shares outstanding |
673.0 | 599.6 | 672.0 | 595.3 | ||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Stock options |
5.5 | 4.8 | 5.9 | | ||||||||||||
Convertible senior notes |
| 31.3 | 0.1 | | ||||||||||||
Equity units |
4.5 | 43.7 | 4.5 | | ||||||||||||
Diluted weighted average shares outstanding |
683.0 | 679.4 | 682.5 | 595.3 | ||||||||||||
7. Convertible Debt and Equity Units Exchange
During the fourth quarter of fiscal year 2009, the Company announced and settled the convertible
senior notes and Equity Unit exchange offering. Upon settlement of the exchange offers,
approximately $805 million aggregate principal amount of debt was exchanged for 75 million shares
of common stock and approximately $101 million in cash. As a result of the exchanges, the Company
recognized approximately $111 million of debt conversion costs within its Condensed Consolidated
Statements of Income which is comprised of $101 million of premium costs on the exchange and a $10
million charge related to unamortized debt issuance costs.