JOHNSON CONTROLS INC 
By MILWAUKEE, April 23, 2014 /PRNewswire/ -- For the second quarter of fiscal 2014, Johnson Controls, Inc. (NYSE: JCI), a global multi-industrial company, reported net income of $261 million, or $0.39 per share, on $10.5 billion in revenues. Second quarter earnings per share (including discontinued operations and excluding non-recurring items) was $0.66, which is at the high end of the company's previously issued guidance and up 50 percent versus $0.44 last year. As a result of the previously announced sale of its Automotive Electronics business, the Company has reclassified Electronics' results to discontinued operations and prior year financial statements have been revised accordingly.
Excluding restructuring and non-recurring items in the second quarter, continuing operations highlights include:
-- Net revenues of $10.5 billion vs. $10.1 billion in Q2 2013, up 4 percent
-- Income from business segment operations of $629 million compared with
$461 million a year ago, up 36 percent
-- Diluted earnings per share from continuing operations of $0.64 versus
$0.42 in the same quarter last year, up 52 percent
Non-recurring items that impacted reported second quarter earnings include:
2014 second quarter (net charge of $0.27 per share)
-- Non-cash tax charge of $180 million related to the repatriation of
foreign cash associated with the Electronics divestiture
2013 second quarter (net charge of $0.20 per share)
-- $82 million pre-tax equity interest gain ($0.07 per diluted share)
-- $111 million of non-cash tax charges ($0.16 per diluted share)
-- $84 million pre-tax restructuring charge ($0.11 per diluted share)
"While the economic environment continues to challenge top line growth in some of our businesses, I am pleased with the profitability improvements in all businesses" said Alex Molinaroli, Johnson Controls chairman and chief executive officer. "These results are consistent with the expectations we disclosed during our first quarter earnings call."
Business results
Automotive Experience revenues (excluding discontinued operations) in the fiscal second quarter of 2014 were $5.6 billion, up 11 percent compared to the 2013 quarter, reflecting higher automotive production in all geographic regions. Automotive industry production in the quarter increased 5 percent in North America, 5 percent in Europe and 9 percent in China. Revenues in China, which are primarily related to Seating and generated through non-consolidated joint ventures, increased 25 percent to $1.6 billion.
Automotive Experience segment income (excluding discontinued operations) of $241 million was up 226% compared to $74 million in the second quarter of 2013. The 2013 results exclude an $82 million non-recurring equity income gain. The increase was primarily led by improvements in the company's Seating business, with segment income of $236 million in the current quarter, compared with $94 million last year. The Interiors business showed a profit of $5 million this year compared with a $20 million loss last year. Automotive Experience improvement was a result of improved operational performance in the Company's metals and mechanisms business and Europe, benefits from restructuring initiatives and higher revenues.
Building Efficiency sales in the fiscal second quarter of 2014 were $3.3 billion, 5 percent lower than the 2013 second quarter, as higher revenues in Asia were more than offset by lower market demand in North America, Europe and the Middle East. Excluding Global Workplace Solutions (GWS) and divestitures, revenues were 2 percent lower. Adjusted for divestitures and currency, backlog was flat compared to the second quarter of last year at $4.8 billion. Second quarter orders were 2 percent lower than last year.
Building Efficiency segment income of $152 million was up 9 percent compared with $139 million the 2013 second quarter, due to cost reduction initiatives and improved margins in North America, Asia and GWS.
Power Solutions sales in the fiscal second quarter of 2014 were flat at $1.6 billion versus the 2013 quarter. Excluding the impact of lead, sales increased 4 percent. Global original equipment battery shipments increased 9 percent, while aftermarket unit shipments were up 1 percent. Power Solutions segment income was $236 million, down 5 percent, compared with $248 million in the second quarter of 2013. The 2013 quarter benefited from a $24 million legal settlement; adjusted for this item, segment income was up 5 percent and margins were up 70 basis points.
The Company is providing updated guidance now that Electronics is reported as a discontinued operation. Previously, the Company provided full year earnings guidance including Electronics of $3.15 - $3.30 per diluted share. Excluding Electronics earnings of approximately $0.10 - $0.12 per share, the adjusted range for continuing operations would be $3.05 to $3.18 per share.
The Company's updated guidance for earnings from continuing operations is now $3.10 to $3.15 per share. For the third quarter of 2014, the Company provided earnings guidance from continuing operations of $0.81 to $0.84 per share, up 13% to 17%. The Company also reaffirmed its full fiscal year guidance for free cash flow of $1.6 billion and segment margin improvements in all three of its businesses. The updated guidance assumes that underlying earnings from the recently announced Air Distribution Technologies acquisition are neutral in 2014.
Portfolio update
On April 16, 2014, Johnson Controls announced a definitive agreement to purchase Air Distribution Technologies, one of the strongest and largest independent providers of air distribution and ventilation products in North America, for $1.6 billion. The transaction, which is forecast to close in July 2014 subject to required regulatory approvals, is expected to significantly expand Johnson Controls' third party distribution channels and create cross-selling opportunities for existing and new products.
The Company said it believes it is on target to close the sale of its Automotive Electronics business by the end of its 2014 fiscal year and that the review of strategic options for its Automotive Interiors business is continuing.
"While we have made significant progress on the changes to our portfolio, our priority remains operational excellence to drive continued increases in profitability and shareholder value. Our first half results demonstrate the success of our employees' efforts and I thank them for their dedication to our customers and shareholders," said Molinaroli.
FORWARD-LOOKING STATEMENTS
Johnson Controls, Inc. has made statements in this document that are forward-looking and, therefore, are subject to risks and uncertainties. All statements in this document other than statements of historical fact are statements that are, or could be, deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this document, statements regarding future financial position, sales, costs, earnings, cash flows, other measures of results of operations, capital expenditures or debt levels and plans, objectives, outlook, targets, guidance or goals are forward-looking statements. Words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "forecast," "project" or "plan" or terms of similar meaning are also generally intended to identify forward-looking statements. Johnson Controls cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond Johnson Controls' control, that could cause Johnson Controls' actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include required regulatory approvals that are material conditions for proposed transactions to close, the strength of the U.S. or other economies, automotive vehicle production levels, mix and schedules, energy and commodity prices, availability of raw materials and component products, currency exchange rates, and cancellation of or changes to commercial contracts, as well as other factors discussed in Item 1A of Part I of Johnson Controls' most recent Annual Report on Form 10-K for the year ended September 30, 2013. Shareholders, potential investors and others should consider these factors in evaluating the forward-looking statements and should not place undue reliance on such statements. The forward-looking statements included in this document are only made as of the date of this document, and Johnson Controls assumes no obligation, and disclaims any obligation, to update forward-looking statements to reflect events or circumstances occurring after the date of this document.
ABOUT JOHNSON CONTROLS
Johnson Controls is a global diversified technology and industrial leader serving customers in more than 150 countries. Our 170,000 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. In 2013, Corporate Responsibility Magazine recognized Johnson Controls as the #14 company in its annual "100 Best Corporate Citizens" list. For additional information, please visit http://www.johnsoncontrols.com. Follow Johnson Controls Investor Relations on Twitter at www.twitter.com/JCI_IR.
CONTACT: Glen L. Ponczak
(Investors)
414) 524-2375
Fraser Engerman
(Media)
(414) 524-2733
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
Three Months Ended
March 31,
------------------
2014 2013 (Revised)
---- -------------
Net sales $10,463 $10,102
Cost of sales 8,917 8,662
----- -----
Gross profit 1,546 1,440
Selling, general and
administrative expenses (990) (1,044)
Restructuring and
impairment costs - (84)
Net financing charges (56) (66)
Equity income 73 147
--- ---
Income from continuing
operations before income
taxes 573 393
Income tax provision 110 214
--- ---
Net income from continuing
operations 463 179
Income (loss) from
discontinued operations,
net of tax (172) 14
---- ---
Net income 291 193
Less: Income attributable
to noncontrolling
interests 30 29
--- ---
Net income attributable to
JCI $261 $164
==== ====
Income from continuing
operations $433 $150
Income (loss) from
discontinued operations (172) 14
---- ---
Net income attributable to
JCI $261 $164
==== ====
Diluted earnings per share
from continuing operations $0.64 $0.22
Diluted earnings (loss) per
share from discontinued
operations (0.26) 0.02
----- ----
Diluted earnings per share
* $0.39 $0.24
===== =====
Diluted weighted average
shares 672 689
=== ===
Shares outstanding at
period end 664 685
=== ===
* Due to rounding
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
Six Months Ended
March 31,
-----------------
2014 2013 (Revised)
---- -------------
Net sales $21,037 $20,211
Cost of sales 17,915 17,335
------ ------
Gross profit 3,122 2,876
Selling, general and
administrative expenses (2,028) (2,047)
Restructuring and
impairment costs - (84)
Net financing charges (111) (126)
Equity income 185 231
--- ---
Income from continuing
operations before income
taxes 1,168 850
Income tax provision 221 299
--- ---
Net income from continuing
operations 947 551
Income (loss) from
discontinued operations,
net of tax (154) 30
---- ---
Net income 793 581
Less: Income attributable
to noncontrolling
interests 63 58
--- ---
Net income attributable to
JCI $730 $523
==== ====
Income from continuing
operations $884 $493
Income (loss) from
discontinued operations (154) 30
---- ---
Net income attributable to
JCI $730 $523
==== ====
Diluted earnings per share
from continuing operations $1.31 $0.72
Diluted earnings (loss) per
share from discontinued
operations (0.23) 0.04
----- ----
Diluted earnings per share $1.08 $0.76
===== =====
Diluted weighted average
shares 677 688
=== ===
Shares outstanding at
period end 664 685
=== ===
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions; unaudited)
March 31, September 30, March 31,
2014 2013 2013 (Revised)
---- ---- -------------
ASSETS
Cash
and
cash
equivalents $209 $1,055 $481
Accounts
receivable
-
net 7,028 7,206 7,317
Inventories 2,516 2,325 2,449
Assets
held
for
sale 816 804 -
Other
current
assets 2,490 2,308 2,670
----- ----- -----
Current
assets 13,059 13,698 12,917
Property,
plant
and
equipment
-
net 6,632 6,585 6,525
Goodwill 6,722 6,589 7,097
Other
intangible
assets
-
net 1,056 999 1,126
Investments
in
partially-
owned
affiliates 1,110 1,024 1,059
Other
noncurrent
assets 2,638 2,623 3,224
----- ----- -----
Total
assets $31,217 $31,518 $31,948
======= ======= =======
LIABILITIES AND
EQUITY
Short-
term
debt
and
current
portion
of
long-
term
debt $1,518 $938 $2,080
Accounts
payable
and
accrued
expenses 7,038 7,533 7,125
Liabilities
held
for
sale 333 402 -
Other
current
liabilities 3,263 3,244 2,896
----- ----- -----
Current
liabilities 12,152 12,117 12,101
Long-
term
debt 4,733 4,560 4,590
Other
noncurrent
liabilities 2,190 2,110 2,929
Redeemable
noncontrolling
interests 183 157 205
Shareholders'
equity
attributable
to
JCI 11,686 12,314 11,889
Noncontrolling
interests 273 260 234
--- --- ---
Total
liabilities
and
equity $31,217 $31,518 $31,948
======= ======= =======
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
Three Months
Ended March 31,
----------------
2014 2013 (Revised)
---- -------------
Operating Activities
Net income attributable to
JCI $261 $164
Income attributable to
noncontrolling interests 30 29
--- ---
Net income 291 193
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation
and
amortization 247 234
Pension
and
postretirement
benefit
expense 7 3
Pension
and
postretirement
contributions (22) (29)
Equity
in
earnings
of
partially-
owned
affiliates,
net
of
dividends
received (71) (51)
Deferred
income
taxes (67) 140
Restructuring
and
impairment
costs - 13
Fair
value
adjustment
of
equity
investment - (82)
Other 15 14
Changes in assets and
liabilities,
excluding
acquisitions and
divestitures:
Receivables (338) (295)
Inventories (66) (91)
Restructuring
reserves (62) 35
Accounts
payable
and
accrued
liabilities 554 248
Change
in
other
assets
and
liabilities 242 (115)
--- ----
Cash provided by operating
activities 730 217
---
Investing Activities
Capital expenditures (257) (293)
Sale of property, plant and
equipment 28 29
Acquisition of businesses,
net of cash acquired - (113)
Other 7 47
Cash used by investing
activities (222) (330)
----
Financing Activities
Increase (decrease) in
short and long-term debt
- net (418) 241
Stock repurchases - (50)
Payment of cash dividends (146) -
Proceeds from the exercise
of stock options 33 51
Other 5 27
--- ---
Cash provided (used) by
financing activities (526) 269
----
Effect of exchange rate
changes on cash and cash
equivalents (20) 11
Cash held for sale 2 -
--- ---
Increase (decrease) in cash
and cash equivalents $(36) $167
==== ====
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
Six Months Ended
March 31,
-----------------
2014 2013 (Revised)
---- -------------
Operating Activities
Net income attributable to
JCI $730 $523
Income attributable to
noncontrolling interests 63 58
--- ---
Net income 793 581
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation
and
amortization 491 457
Pension
and
postretirement
benefit
expense
(income) 16 (13)
Pension
and
postretirement
contributions (47) (45)
Equity
in
earnings
of
partially-
owned
affiliates,
net
of
dividends
received (145) (99)
Deferred
income
taxes (53) 135
Restructuring
and
impairment
costs - 13
Fair
value
adjustment
of
equity
investment (19) (82)
Other 25 27
Changes in assets and
liabilities, excluding
acquisitions and
divestitures:
Receivables 193 (54)
Inventories (161) (119)
Restructuring
reserves (124) 1
Accounts
payable
and
accrued
liabilities (375) 82
Change
in
other
assets
and
liabilities (145) (369)
---- ----
Cash provided by operating
activities 449 515
---
Investing Activities
Capital expenditures (602) (664)
Sale of property, plant and
equipment 49 46
Acquisition of businesses,
net of cash acquired (128) (113)
Business divestitures 13 -
Other 15 36
Cash used by investing
activities (653) (695)
-----
Financing Activities
Increase in short and long-
term debt - net 745 614
Stock repurchases (1,199) (50)
Payment of cash dividends (276) (253)
Proceeds from the exercise
of stock options 117 85
Other 9 28
--- ---
Cash provided (used) by
financing activities (604) 424
-----
Effect of exchange rate
changes on cash and cash
equivalents (39) (28)
Cash held for sale 1 -
--- ---
Increase (decrease) in cash
and cash equivalents $(846) $216
===== ====
FOOTNOTES
1. Business Unit Summary
In the second quarter of fiscal 2014, the Company began reporting its Automotive Experience Electronics business as a discontinued operation, which required retrospective application to previously reported financial information. As a result, the segment income amounts shown below are for continuing operations and exclude the Electronics business segment income of $29 million for the fiscal 2013 second quarter and $61 million for fiscal 2013 year-to-date. In addition, the fiscal 2014 segment income reported in the first quarter included $36 million related to the Electronics business which is now excluded below.
In the fourth quarter of fiscal 2013, the Company changed its method of accounting for certain inventory at Power Solutions from LIFO to FIFO, which required retrospective application to prior year financial statements. As a result of this accounting change, the segment income amounts shown below reflect a decrease to cost of sales of $27 million ($0.03) for the fiscal 2013 second quarter and $35 million ($0.03) for fiscal 2013 year-to-date.
Three Months Ended Six Months Ended
(in
millions) March 31, March 31,
--------- ---------
2014 2013 (Revised) % 2014 2013 (Revised) %
---- ------------- --- ---- ------------- ---
(unaudited) (unaudited)
Net Sales
---------
Building
Efficiency $3,276 $3,456 -5% $6,657 $6,988 -5%
Automotive
Experience 5,623 5,086 11% 11,044 9,987 11%
Power
Solutions 1,564 1,560 0% 3,336 3,236 3%
Net Sales $10,463 $10,102 $21,037 $20,211
======= ======= ======= =======
Segment
Income(1)
----------
Building
Efficiency $152 $139 9% $298 $309 -4%
Automotive
Experience 241 156 (2) 54% 438 227 (2) 93%
Power
Solutions 236 248 -5% 543 524 4%
Segment
Income 629 543 (2) 1,279 1,060 (2)
--- --- ----- -----
Restructuring
costs - (84) - (84)
Net
financing
charges (56) (66) (111) (126)
Income from
continuing
operations
before
income
taxes $573 $393 $1,168 $850
==== ==== ====== ====
Net Sales
---------
Products and
systems $8,558 $8,079 6% $17,163 $16,123 6%
Services 1,905 2,023 -6% 3,874 4,088 -5%
$10,463 $10,102 $21,037 $20,211
======= ======= ======= =======
Cost of
Sales
-------
Products and
systems $7,406 $6,983 6% $14,783 $13,957 6%
Services 1,511 1,679 -10% 3,132 3,378 -7%
$8,917 $8,662 $17,915 $17,335
====== ====== ======= =======
(1) Management evaluates the performance of the business units based primarily on segment income, which represents income from continuing operations before income taxes and noncontrolling interests, excluding net financing charges, significant restructuring and impairment costs, and the net mark-to-market adjustments related to pension and postretirement plans.
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) The fiscal 2013 second quarter reported segment income numbers includes an $82 million non-recurring equity interest gain in Automotive Experience.
2. Earnings Per Share Reconciliation
A reconciliation of earnings per share, as reported, to earnings per share, excluding non-recurring/unusual items, for the fiscal 2013 second quarter is shown below:
Net Income Net Income
Attributable to Attributable to
JCI JCI from
Continuing
Operations
----------------- ----------------
Three Months Three Months
Ended Ended
March 31, March 31,
--------- ---------
2014 2013 (Revised) 2014 2013 (Revised)
---- ------------- ---- -------------
(unaudited) (unaudited)
Earnings per share,
as reported $0.39 $0.24 $0.64 $0.22
Non-recurring/unusual items:
Non-cash tax charge related to the repatriation of foreign
cash associated with
the Electronics
divestiture 0.27 - - -
Equity affiliate
acquisition gain - (0.07) - (0.07)
Restructuring and
impairment costs - 0.11 - 0.11
Tax valuation
allowances and tax
reserves - 0.16 - 0.16
--- ---- --- ----
Earnings per share,
excluding non-
recurring/unusual
items $0.66 $0.44 $0.64 $0.42
===== ===== ===== =====
3. Income Taxes
The Company's total effective tax rate before consideration of non-cash tax charges, restructuring and impairment costs, and other non-recurring items for the second quarter of fiscal 2014 and fiscal 2013 is 20 percent. The fiscal 2014 second quarter includes a non-cash tax charge of $180 million ($0.27) related to the repatriation of foreign cash associated with the Electronics divestiture. The fiscal 2013 second quarter includes $111 million ($0.16) of non-cash tax charges related primarily to valuation allowances in Germany and Brazil.
4. Equity Affiliate Acquisition Gain
The fiscal 2013 second quarter included an equity interest gain of $82 million related to an automotive joint venture.
5. Restructuring
The fiscal 2013 second quarter included restructuring and impairment costs of $84 million related primarily to Automotive Interiors Europe and South America.
6. Sale of Automotive Electronics
The Company has signed a definitive agreement to sell its Automotive Experience Electronics business to Visteon Corporation for $265 million. At March 31, 2014, the Company determined that the Electronics business met the criteria to be classified as a discontinued operation and the condensed consolidated financial statements have been revised for all periods presented. The Electronics business is included within assets held for sale and liabilities held for sale in the accompanying condensed consolidated statements of financial position as of March 31, 2014 and September 30, 2013.
7. 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 Six Months Ended
March 31, March 31,
--------- ---------
2014 2013 (Revised) 2014 2013 (Revised)
---- ------------- ---- -------------
(unaudited) (unaudited)
Income Available to Common
Shareholders
Basic and diluted income
available to common
shareholders $261 $164 $730 $523
---- ---- ---- ----
Weighted Average Shares
Outstanding
Basic
weighted
average
shares
outstanding 663.8 684.0 669.0 683.6
Effect of dilutive
securities:
Stock
options
and
unvested
restricted
stock 8.0 5.4 8.0 4.4
Diluted
weighted
average
shares
outstanding 671.8 689.4 677.0 688.0
===== ===== ===== =====
SOURCE Johnson Controls, Inc.
