Operating income is forecast to slightly decline in the first quarter. The decline is attributable to the lower sales growth, the timing of automotive price reductions and raw material cost increases versus the rate of cost reductions, and the cost of workforce reductions and footprint changes. Earnings per share is also expected to be lower due to a one-time tax benefit in the first quarter of 2004.
Fiscal 2005 Full-Year Financial Estimates (dollars in millions) Consolidated sales growth 8-10% Consolidated operating income growth 10-12% Interest expense, net of interest income $125-130 Base effective income tax rate(2) 26.5% Minority interests in net earnings of subsidiaries $80-90 Net income growth In excess of operating income growth Capital expenditures $725-775 Depreciation $685-705 Total debt to total capitalization Below 30% (1) The three-year amount, and 2005 amount include approximately $450 and $100 million, respectively, of unconsolidated sales. (2) Incremental one-time benefits in near-term periods are likely due to adjustments related to valuation reserves and audit settlements. Webcast of Analyst Presentation
The company is holding a meeting with investors today in New York to discuss the company's outlook. The meeting will be webcast at 1pm Eastern. To access the webcast, go to www.johnsoncontrols.com and click on Company/Investors.
Non-GAAP Financial Measures and Safe Harbor
Johnson Controls has provided information regarding Return on Invested Capital (ROIC), a non-GAAP financial measure as defined under the SEC Regulation G rules. ROIC is calculated as the twelve-month rolling average return (net income plus after-tax interest expense) divided by the twelve- month rolling average of invested capital (total debt plus shareholders' equity.) Company management believes ROIC is a useful measure in providing investors with information regarding the company's performance. The company's calculation of ROIC is likely to differ from the methods used by other companies. A reconciliation of Johnson Controls future targeted ROIC to the most directly comparable financial measure calculation presented in accordance with GAAP is not readily available as the company's future targeted ROIC comprises forecasted financial amounts over the next several years, which are not publicly disclosed.
Johnson Controls has made forward-looking statements in this document pertaining to its financial results for fiscal 2004 and 2005 and future years that are based on preliminary data and are subject to risks and uncertainties. Forward-looking statements include information concerning possible or assumed future risks and may include words such as "believes," "forecasts," "expects," "outlook" or similar expressions. For those statements, the company cautions that numerous important factors, such as automotive vehicle production levels and schedules, the strength of the U.S. or other economies, currency exchange rates, cancellation of commercial contracts, as well as those factors discussed in the company's Form 8-K (dated January 7, 2004) could affect the company's 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.