JOHNSON CONTROLS INC MILWAUKEE, July 18, 2014 /PRNewswire/ -- For the third quarter of fiscal 2014, Johnson Controls, Inc. (NYSE: JCI), a global multi-industrial company, reported net income from continuing operations of $238 million, or $0.35 per share, on $10.8 billion in revenues. Third quarter diluted earnings per share from continuing operations and excluding restructuring and non-recurring items was $0.84, up 17 percent versus $0.72 last year. As a result of the previously announced sale of its Automotive Electronics business, the company has classified Electronics results as discontinued operations and prior year financial statements have been revised accordingly.
Excluding restructuring and non-recurring items in the third quarter, continuing operations highlights include:
-- Net revenues of $10.8 billion versus $10.5 billion in Q3 2013, up 3
percent
-- Income from business segment operations of $794 million compared with
$690 million a year ago, up 15 percent
-- Diluted earnings per share of $0.84 versus $0.72 in the same quarter
last year, up 17 percent
Non-recurring items that impacted reported third quarter earnings from continuing operations include:
2014 third quarter (primarily related to business portfolio changes)
-- Pre-tax restructuring charges of $162 million primarily related to the
Automotive Interiors business ($151 million after-tax)
-- Pre-tax losses from divested businesses and other transaction-related
costs of $140 million ($174 million after-tax)
2013 third quarter
-- $140 million in non-recurring tax benefits
-- Pre-tax restructuring charges of $143 million ($104 million after-tax)
"Our performance was consistent with the expectations we disclosed in our second quarter earnings call, with strong overall performance by our automotive and power businesses and margin improvement in Building Efficiency," said Alex Molinaroli, Johnson Controls chairman and chief executive officer. "The overall non-residential HVAC markets remain challenged, but we are starting to see some increased demand in certain vertical markets. While orders are still lower than last year, the institutional building sector started showing some improvement as we exited the quarter."
Business results (All results exclude non-recurring items)
Automotive Experience revenues from continuing operations in the fiscal third quarter of 2014 were $5.7 billion, up 7 percent compared to the 2013 quarter, reflecting higher automotive production in all geographic regions. Automotive industry production in the quarter increased 4 percent in North America, 1 percent in Europe and 11 percent in China. Revenues in China, which are primarily related to Seating and generated through non-consolidated joint ventures, increased 28 percent to $1.8 billion.
Automotive Experience segment income from continuing operations of $295 million was up 22% compared to $241 million in the third quarter of 2013. The increase reflects profitability improvements in the company's Seating and Interiors businesses. Operational performance improved in the company's metals and mechanisms business and in Europe, which benefitted from restructuring initiatives and higher revenues.
In the third quarter, BMW Brilliance Automotive Ltd. awarded a luxury sedan complete seat program in China to the Shenyang Jinbei Johnson Controls Automotive joint venture. The program is expected to be worth approximately $2.1 billion in revenues over its lifetime, with production expected to launch in 2017.
Building Efficiency sales in the fiscal third quarter of 2014 were $3.6 billion, 4 percent lower than the 2013 third quarter due to lower market demand in North America, Latin America and the Middle East. Excluding Global Workplace Solutions (GWS) and the impact of divestitures, revenues were 1 percent lower.
Adjusted for divestitures and currency, backlog was $4.7 billion compared to the third quarter of last year at $5.0 billion. Third quarter orders were 8 percent lower than last year. Orders in the 2013 quarter were favorably impacted by a $70 million Veteran's Administration hospital contract.
The company said that certain vertical markets showed higher demand in the 2014 quarter, though this growth was more than offset by lower demand in other key markets. New construction demand was stronger in the education, state/local government and industrial new construction buildings markets as well for retrofits of U.S. Federal government and healthcare facilities.
Building Efficiency segment income of $306 million was down 3 percent compared with $314 million in the 2013 third quarter, due primarily to the lower volumes. Segment income profit margins were 8.6%, an increase of 10 basis points compared with the third quarter of last year.
The company noted that its acquisition of Air Distribution Technologies Inc. (ADT) which was completed late in the 2014 third quarter, did not have a material impact on earnings. The transaction is expected to increase the company's exposure to the early cycle light commercial buildings market, significantly expand Johnson Controls' third party distribution channels and create cross-selling opportunities for existing and new products. As a result, the company said it expects its Building Efficiency business to report low single-digit revenue growth in the fiscal 2014 fourth quarter.
Power Solutions sales in the fiscal third quarter of 2014 were $1.5 billion, up 6 percent versus the 2013 quarter. Excluding the impact of lead, sales increased 8 percent. Global unit shipments increased 5 percent, with global production of AGM batteries for start-stop vehicles increasing 17 percent compared with the prior year. Power Solutions segment income was $193 million, up 43 percent, versus $135 million in the third quarter of 2013 due to improved product mix, higher volumes and operational efficiencies.
Johnson Controls said that in the 2014 third quarter, it was awarded new original equipment battery business in China for both traditional and AGM lead-acid batteries. Production is expected to launch in 2016. It also won new aftermarket business in the United States, Europe and Japan, totaling approximately three million units annually, with some of the incremental production to start later in the calendar year.
For the fourth quarter of 2014, the company provided earnings guidance from continuing operations of $1.00 - $1.02 per share, up approximately 11 percent versus the 2013 fourth quarter, excluding any transaction-related costs. 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 not material in the fourth quarter.
"We continue to execute well across all of our businesses, improving our operational performance while making significant changes to our businesses that we expect will drive future growth and increased shareholder value," said Molinaroli. "I thank our employees for their dedication and commitment during a period of significant change in our organization."
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 2014, Corporate Responsibility Magazine recognized Johnson Controls as the #12 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.
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
Three Months Ended June 30,
---------------------------
2014 2013 (Revised)
---- -------------
Net sales $10,812 $10,499
Cost of sales 9,149 8,935
----- -----
Gross profit 1,663 1,564
Selling, general
and administrative
expenses (977) (977)
Gain (loss) on
business
divestitures (120) 29
Restructuring and
impairment costs (162) (143)
Net financing
charges (67) (67)
Equity income 88 74
--- ---
Income from
continuing
operations before
income taxes 425 480
Income tax
provision
(benefit) 167 (72)
--- ---
Net income from
continuing
operations 258 552
Income (loss) from
discontinued
operations, net of
tax (62) 20
--- ---
Net income 196 572
Less: Income
attributable to
noncontrolling
interests 20 22
--- ---
Net income
attributable to
JCI $176 $550
==== ====
Income from
continuing
operations $238 $530
Income (loss) from
discontinued
operations (62) 20
--- ---
Net income
attributable to
JCI $176 $550
==== ====
Diluted earnings
per share from
continuing
operations $0.35 $0.77
Diluted earnings
(loss) per share
from discontinued
operations (0.09) 0.03
----- ----
Diluted earnings
per share $0.26 $0.80
===== =====
Diluted weighted
average shares 672 690
=== ===
Shares outstanding
at period end 666 684
=== ===
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)
Nine Months Ended June 30,
--------------------------
2014 2013 (Revised)
---- -------------
Net sales $31,849 $30,710
Cost of sales 27,064 26,270
------ ------
Gross profit 4,785 4,440
Selling, general
and administrative
expenses (3,014) (3,024)
Gain (loss) on
business
divestitures (111) 29
Restructuring and
impairment costs (162) (227)
Net financing
charges (178) (193)
Equity income 273 305
--- ---
Income from
continuing
operations before
income taxes 1,593 1,330
Income tax
provision 388 227
--- ---
Net income from
continuing
operations 1,205 1,103
Income (loss) from
discontinued
operations, net of
tax (216) 50
---- ---
Net income 989 1,153
Less: Income
attributable to
noncontrolling
interests 83 80
--- ---
Net income
attributable to
JCI $906 $1,073
==== ======
Income from
continuing
operations $1,122 $1,023
Income (loss) from
discontinued
operations (216) 50
---- ---
Net income
attributable to
JCI $906 $1,073
==== ======
Diluted earnings
per share from
continuing
operations $1.66 $1.49
Diluted earnings
(loss) per share
from discontinued
operations (0.32) 0.07
----- ----
Diluted earnings
per share $1.34 $1.56
===== =====
Diluted weighted
average shares 675 689
=== ===
Shares outstanding
at period end 666 684
=== ===
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions; unaudited)
June 30, September 30, June 30,
2014 2013 2013 (Revised)
---- ---- -------------
ASSETS
Cash and cash equivalents $160 $1,055 $391
Accounts receivable - net 6,710 7,206 7,259
Inventories 2,591 2,325 2,470
Assets held for sale 1,575 804 -
Other current assets 2,411 2,308 2,619
----- ----- -----
Current assets 13,447 13,698 12,739
Property, plant and equipment -
net 6,278 6,585 6,569
Goodwill 7,658 6,589 7,135
Other intangible assets - net 1,669 999 1,055
Investments in partially-owned
affiliates 966 1,024 1,022
Noncurrent assets held for sale 610 - -
Other noncurrent assets 2,446 2,623 3,300
----- ----- -----
Total assets $33,074 $31,518 $31,820
=========
LIABILITIES AND EQUITY
Short-term debt and current
portion of long-term debt $1,071 $938 $1,431
Accounts payable and accrued
expenses 6,701 7,533 7,323
Liabilities held for sale 994 402 -
Other current liabilities 3,377 3,244 3,030
----- ----- -----
Current liabilities 12,143 12,117 11,784
Long-term debt 6,416 4,560 4,593
Other noncurrent liabilities 2,236 2,110 2,807
Redeemable noncontrolling
interests 184 157 205
Shareholders' equity
attributable to JCI 11,815 12,314 12,188
Noncontrolling interests 280 260 243
--- --- ---
Total liabilities and
equity $33,074 $31,518 $31,820
=========
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
Three Months Ended June
30,
------------------------
2014 2013 (Revised)
---- -------------
Operating Activities
Net income attributable to JCI $176 $550
Income from continuing operations attributable to
noncontrolling interests 20 22
--- ---
Net income 196 572
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and
amortization 240 239
Pension and
postretirement
benefit expense 9 8
Pension and
postretirement
contributions (21) (16)
Equity in earnings
of partially-
owned affiliates,
net of dividends
received 49 50
Deferred income
taxes (7) (144)
Non-cash
restructuring and
impairment charges 88 36
Loss (gain) on
divestitures 120 (29)
Other 23 10
Changes in assets
and liabilities,
excluding
acquisitions and
divestitures:
Receivables 10 60
Inventories (152) (32)
Restructuring
reserves 76 66
Accounts
payable and
accrued
liabilities 203 235
Change in
other assets
and
liabilities (120) (21)
---- ---
Cash provided by
operating activities 714 1,034
--- -----
Investing Activities
Capital expenditures (274) (265)
Sale of property, plant and equipment 12 7
Acquisition of businesses, net of cash acquired (1,589) -
Business divestitures (54) -
Other 1 (10)
Cash used by investing
activities (1,904) (268)
------ ----
Financing Activities
Increase (decrease) in short and long-term debt -
net 1,240 (646)
Stock repurchases - (175)
Payment of cash dividends (146) (130)
Proceeds from the exercise of stock options 56 88
Other (6) 7
--- ---
Cash provided (used) by
financing activities 1,144 (856)
----- ----
Effect of exchange rate changes on cash and cash
equivalents 24 -
Cash held for sale (27) -
--- ---
Decrease in cash and cash equivalents $(49) $(90)
==== ====
JOHNSON CONTROLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
Nine Months Ended June 30,
--------------------------
2014 2013 (Revised)
---- -------------
Operating Activities
Net income attributable to JCI $906 $1,073
Income from continuing operations attributable to
noncontrolling interests 83 80
--- ---
Net income 989 1,153
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and
amortization 731 696
Pension and
postretirement
benefit expense
(income) 25 (5)
Pension and
postretirement
contributions (68) (61)
Equity in earnings
of partially-
owned affiliates,
net of dividends
received (96) (49)
Deferred income
taxes (60) (9)
Non-cash
restructuring and
impairment charges 88 49
Loss (gain) on
divestitures 111 (29)
Fair value
adjustment of
equity investment (19) (82)
Other 57 37
Changes in assets
and liabilities,
excluding
acquisitions and
divestitures:
Receivables 203 6
Inventories (313) (151)
Restructuring
reserves (48) 67
Accounts
payable and
accrued
liabilities (172) 317
Change in
other assets
and
liabilities (265) (390)
---- ----
Cash provided by
operating activities 1,163 1,549
----- -----
Investing Activities
Capital expenditures (876) (929)
Sale of property, plant and equipment 61 53
Acquisition of businesses, net of cash acquired (1,717) (113)
Business divestitures (41) -
Other 16 26
Cash used by investing
activities (2,557) (963)
------ ----
Financing Activities
Increase (decrease) in short and long-term debt -
net 1,985 (32)
Stock repurchases (1,199) (225)
Payment of cash dividends (422) (383)
Proceeds from the exercise of stock options 173 173
Other 3 35
--- ---
Cash provided (used) by
financing activities 540 (432)
--- ----
Effect of exchange rate changes on cash and cash
equivalents (15) (28)
Cash held for sale (26) -
--- ---
Increase (decrease) in cash and cash equivalents $(895) $126
===== ====
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 $39 million
for the fiscal 2013 third
quarter and $100 million for
fiscal 2013 year-to-date.
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 an
increase to cost of sales of $35
million ($0.03) for the fiscal
2013 third quarter and no net
impact year-to-date.
Three Months Ended Nine Months Ended
(in millions) June 30, June 30,
-------- --------
2014 2013 (Revised) % 2014 2013 (Revised) %
---- ------------- --- ---- ------------- ---
(unaudited) (unaudited)
Net Sales
---------
Building Efficiency $3,576 $3,712 -4% $10,233 $10,700 -4%
Automotive Experience 5,730 5,362 7% 16,774 15,349 9%
Power Solutions 1,506 1,425 6% 4,842 4,661 4%
Net Sales $10,812 $10,499 $31,849 $30,710
======= ======= ======= =======
Segment Income (1)
-----------------
Building Efficiency $261 $314 -17% $559 $623 -10%
Automotive Experience 200 241 -17% 638 468 36%
Power Solutions 193 135 43% 736 659 12%
Segment Income 654 (2) 690 1,933 1,750
--- --- ----- -----
Restructuring and impairment
costs (162) (143) (162) (227)
Net financing charges (67) (67) (178) (193)
Income from continuing
operations before income taxes $425 $480 $1,593 $1,330
==== ==== ====== ======
Net Sales
---------
Products and systems $8,903 $8,447 5% $26,066 $24,570 6%
Services 1,909 2,052 -7% 5,783 6,140 -6%
$10,812 $10,499 $31,849 $30,710
======= ======= ======= =======
Cost of Sales
-------------
Products and systems $7,623 $7,265 5% $22,406 $21,222 6%
Services 1,526 1,670 -9% 4,658 5,048 -8%
$9,149 $8,935 $27,064 $26,270
====== ====== ======= =======
(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 net mark-to-market
adjustments on 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 2014 third quarter reported
segment income numbers include non-
recurring/unusual items. There were no
2013 third quarter non-recurring/
unusual items included in segment income.
The pre-tax non-recurring/unusual
items are reported in the segments as
follows:
Building Efficiency Automotive Experience Power Solutions Consolidated JCI
------------------- --------------------- --------------- ----------------
Segment income, as reported $261 $200 $193 $654
Non-recurring/unusual
items:
ADT transaction related
costs 20 - - 20
Loss on business
divestitures 25 95 - 120
--- --- --- ---
Segment income, excluding
non-recurring/unusual
items $306 $295 $193 $794
==== ==== ==== ====
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 2014 and 2013 third
quarters is shown below:
Net Income Attributable to Net Income Attributable to
JCI JCI from Continuing
Operations
-------------------------- --------------------------
Three Months Ended Three Months Ended
June 30, June 30,
-------- --------
2014 2013 (Revised) 2014 2013 (Revised)
---- ------------- ---- -------------
(unaudited) (unaudited)
Earnings per share, as
reported $0.26 $0.80 $0.35 $0.77
Non-recurring/unusual
items, net of tax:
ADT transaction related
costs 0.02 - 0.02 -
Loss on business
divestitures 0.24 - 0.24 -
Restructuring and
impairment costs 0.22 0.15 0.22 0.15
Electronics divestiture
related costs 0.11 - - -
Tax reserve adjustments - (0.20) - (0.20)
--- ----- --- -----
Earnings per share,
excluding non-recurring/
unusual items* $0.85 $0.74 $0.84 $0.72
===== ===== ===== =====
* May not sum due to
rounding.
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 third quarter of fiscal 2014
and fiscal 2013 is approximately 20
percent. The fiscal 2013 third
quarter includes $140 million ($0.20)
of non-cash tax benefits, related
primarily to a net tax reserve
adjustment of $79 million in the U.S.
and $61 million in Mexico.
4. Restructuring
The fiscal 2014 third quarter includes
restructuring and impairment costs of
$162 million related primarily to the
Automotive Interiors business. The
fiscal 2013 third quarter includes
restructuring and impairment costs of
$143 million related to cost
reduction initiatives in the
Automotive Experience, Building
Efficiency and Power Solutions
businesses. The restructuring costs
consist primarily of workforce
reductions and impairment costs.
5. Acquisition of Air Distribution
Technologies
On June 16, 2014, the Company
completed the purchase of Air
Distribution Technologies (ADT) for
approximately $1.6 billion. ADT is
one of the largest independent
providers of air distribution and
ventilation products in North
America. On June 13, 2014, the
Company completed a public offering
of $1.7 billion aggregate principal
amount of fixed rate senior notes to
finance the purchase of ADT.
6. Business Divestitures
The fiscal 2014 third quarter losses
on business divestitures include $95
million related to the sale of the
Automotive Interiors headliner and
sun visor businesses and $25 million
related to environmental
indemnification costs associated with
a previously divested business.
The sale of the Company's remaining
Automotive Electronics business to
Visteon closed on July 1, 2014. The
Electronics business meets the
criteria to be classified as a
discontinued operation and the
condensed consolidated financial
statements have been revised for all
periods presented. In the fiscal 2014
third quarter, the Company recorded
restructuring, impairment and
transaction costs of $80 million
within discontinued operations
related to the Electronics business.
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 June 30, 2014 and September 30,
2013.
7. Held for Sale
On May 18, 2014, the Company announced
the signing of a definitive agreement
to form a global automotive interiors
joint venture with Yanfeng Automotive
Trim Systems. As a result, a
majority of the Automotive Interiors
business met the reporting
requirements for held for sale
classification in the accompanying
condensed consolidated statement of
financial position as of June 30,
2014.
8. 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 Nine Months Ended
June 30, June 30,
-------- --------
2014 2013 (Revised) 2014 2013 (Revised)
---- ------------- ---- -------------
(unaudited) (unaudited)
Income Available to
Common Shareholders
Basic and diluted
income available to
common
shareholders $176 $550 $906 $1,073
---- ---- ---- ------
Weighted Average
Shares Outstanding
Basic weighted average
shares outstanding 664.4 683.9 667.5 683.7
Effect of dilutive
securities:
Stock options and
unvested restricted
stock 7.9 6.2 7.9 5.0
Diluted weighted
average shares
outstanding 672.3 690.1 675.4 688.7
===== ===== ===== =====
CONTACT: Glen L. Ponczak (Investors)
(414) 524-2375
Fraser Engerman (Media)
(414) 524-2733
SOURCE Johnson Controls, Inc.
