Johnson Controls 2014 Annual Report Download - page 35

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35
FISCAL YEAR 2013 COMPARED TO FISCAL YEAR 2012
Net Sales
Year Ended
September 30,
(in millions) 2013 2012 Change
Net sales $ 41,410 $ 40,604 2%
The increase in consolidated net sales was due to higher sales in the Automotive Experience business ($616 million) and Power
Solutions business ($459 million), partially offset by the unfavorable impact of foreign currency translation ($234 million) and
lower sales in the Building Efficiency business ($35 million). Excluding the unfavorable impact of foreign currency translation,
consolidated net sales increased 3% as compared to fiscal 2012. The favorable impacts of higher Automotive Experience volumes
in North America and Europe, higher global battery shipments and improved pricing in the Power Solutions business, and improved
market conditions in the North America residential market were partially offset by softness in global building demand. Refer to
the segment analysis below within Item 7 for a discussion of net sales by segment.
Cost of Sales / Gross Profit
Year Ended
September 30,
(in millions) 2013 2012 Change
Cost of sales $ 34,945 $ 34,767 1%
Gross profit 6,465 5,837 11%
% of sales 15.6% 14.4%
The increase in total cost of sales year over year corresponds to the sales growth noted above, with gross profit as a percentage of
sales increasing by 120 basis points. Gross profit in the Automotive Experience business was favorably impacted by higher volumes
and lower purchasing costs, partially offset by higher operating costs, and net unfavorable commercial settlements and pricing.
The Power Solutions business experienced favorable pricing and product mix, higher volumes and increased benefits of vertical
integration including the incremental contribution of the Company's battery recycling facility. Gross profit in the Building Efficiency
business experienced favorable margin rates, and benefited year over year from improved labor utilization and pricing initiatives.
Foreign currency translation had a favorable impact on cost of sales of approximately $205 million. Net mark-to-market adjustments
on pension and postretirement plans had a net favorable year over year impact on cost of sales of $216 million ($184 million gain
in fiscal 2013 compared to a $32 million charge in fiscal 2012) primarily due to an increase in year over year discount rates and
favorable asset return experience, partially offset by assumption changes for certain non-U.S. plans. Refer to the segment analysis
below within Item 7 for a discussion of segment income by segment.
Selling, General and Administrative Expenses
Year Ended
September 30,
(in millions) 2013 2012 Change
Selling, general and administrative expenses $ 3,780 $ 4,311 -12%
% of sales 9.1% 10.6%
Selling, general and administrative expenses (SG&A) decreased by $531 million year over year, and SG&A as a percentage of
sales decreased by 150 basis points. The favorable impact of net mark-to-market adjustments on pension and postretirement plans
in SG&A increased year over year by $634 million ($221 million gain in fiscal 2013 compared to a $413 million charge in fiscal
2012) primarily due to an increase in year over year discount rates and favorable asset return experience, partially offset by
assumption changes for certain non-U.S. plans. In addition, a pension settlement gain recorded in the fourth quarter of fiscal 2013
related to a lump-sum buyout of deferred vested participants in the U.S. pension plan had a favorable impact on SG&A of $69
million. Power Solutions business SG&A decreased primarily due to favorable legal settlements and a fiscal 2012 impairment of
an equity investment, partially offset by higher employee related expenses. Automotive Experience business SG&A increased
primarily due to higher engineering and employee related expenses. Building Efficiency business SG&A increased primarily due
to higher employee related expenses, partially offset by cost reduction programs and a fiscal 2013 pension curtailment gain resulting