Johnson Controls 2014 first quarter earnings increase 31 percent on higher revenues and improved profitability; affirms guidance for fiscal 2014

MILWAUKEE, Jan. 23, 2014 /PRNewswire/ -- Johnson Controls, Inc., a global multi-industrial company with established core businesses in the automotive, building and energy storage industries, today reported record financial results for the first quarter of fiscal 2014. Highlights include:

  • Net sales of $10.9 billion, up 5 percent from $10.4 billion in the 2013 first quarter.
  • Income from business segments of $686 million vs. $549 million, up 25 percent versus the 2013 first quarter.
  • Net income of $469 million, or $0.69 per diluted share, compared with net income of $359 million, or $0.52 per diluted share in the 2013 first quarter.

"The significant improvement in profitability resulted from our focus on execution and cost discipline. We also benefitted from the higher levels of global automotive production," said Alex Molinaroli, Johnson Controls chairman and chief executive officer. "While Building Efficiency revenues were lower than last year, there are early indications of improving global commercial buildings markets, which should positively impact the business later in the year. The results in the quarter are consistent with the expectations we disclosed at our analyst day in December."

The company noted that there were several significant events in the 2014 first quarter:

  • A 16 percent increase in its quarterly dividend and the completion of $1.2 billion in share repurchases as part of an overall $3.6 billion, three-year program
  • Business portfolio activities including:
    • An agreement to sell its remaining Electronics business.
    • A memorandum of understanding to create a joint venture with Hitachi to expand its Building Efficiency product offerings.
    • Launch of a strategic review of its Automotive Interiors business.
  • Awarded the largest Building Efficiency contract in company history: State of Hawaii energy savings project

Business results

Automotive Experience revenues in the fiscal first quarter of 2014 were $5.8 billion, up 10 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, 2 percent in Europe and 14 percent in China. Seating and Interiors sales increased at a double digit rate, while Electronics sales were up 7 percent. Revenues in China, which are primarily related to Seating and generated through non-consolidated joint ventures, increased 33 percent to $1.9 billion.

Automotive Experience segment income was $232 million, more than double the $101 million reported in the first quarter of 2013. The increase was primarily led by improvements in the company's Seating business, with segment income of $176 million in the current quarter, compared with $85 million last year. The Automotive Experience improvement was a result of the higher global production levels, benefits from cost reduction initiatives and improved operational performance in the company's metals and mechanisms business.

Building Efficiency sales in the fiscal first quarter of 2014 were $3.4 billion, 4 percent lower than in the 2013 first quarter as higher revenues in Asia were more than offset by lower demand in Europe, the Middle East and Latin America as well as Global Workplace Solutions. Adjusted for divestitures and currency, backlog was down 1 percent compared to the first quarter of last year at $5.0 billion. Orders were 5 percent higher than last year representing the third consecutive quarter of year-over-year improvement.

Segment income of $146 million was down 15 percent compared with $172 million the 2013 first quarter. The 2013 first quarter benefitted from non-recurring contract settlements while the current quarter includes contract-related charges of approximately $20 million. Excluding these items, underlying Building Efficiency earnings increased 6 percent.

Power Solutions sales in the first quarter of 2014 increased 6 percent to $1.8 billion versus $1.7 billion in the 2013 quarter. Global original equipment battery shipments increased 12 percent, while aftermarket unit shipments were up 1 percent. In the quarter, the company increased its ownership in a South American battery joint venture, resulting in a $19 million non-recurring gain. Power Solutions segment income was $308 million, up 12 percent, compared with $276 million in the first quarter of 2013, as a result of the higher volumes, improved mix of products, vertical integration and the joint venture gain.

Johnson Controls said it expects earnings per share of $0.64 - $0.66 in the second quarter of fiscal 2014. The company also reaffirmed its guidance for earnings of $3.15 - $3.30 per share, free cash flow of $1.6 billion and segment margin improvements in all three of its businesses for the full 2014 fiscal year.

"Much of the improvement we have forecast for fiscal 2014 is based on activities within our control. Our first quarter results demonstrate that we are on track to deliver on the expectations we have set," said Molinaroli. "We remain focused on operational improvements to drive continued increases in profitability and shareholder value and expect 2014 to be a year of record sales and earnings for Johnson Controls."

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 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 December 31,


2013



2012 (Revised)






Net sales

$       10,908



$          10,422

Cost of sales

9,251



8,906


Gross profit

1,657



1,516













Selling, general and administrative expenses

(1,084)



(1,052)

Net financing charges

(55)



(61)

Equity income

113



85






Income before income taxes

631



488






Income tax provision

126



99






Net income

505



389






Less: Income attributable to noncontrolling interests

36



30






Net income attributable to JCI

$            469



$               359






Diluted earnings per share 

$           0.69



$              0.52






Diluted weighted average shares

682



687

Shares outstanding at period end

664



684











 

JOHNSON CONTROLS, INC.








CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions; unaudited)

















December 31,


September 30,


December 31,



2013


2013


2012 (Revised)

ASSETS






Cash and cash equivalents

$              245


$           1,055


$               314

Accounts receivable - net

6,743


7,206


7,090

Inventories

2,452


2,325


2,384

Assets held for sale

777


804


-

Other current assets

2,509


2,308


3,115


Current assets

12,726


13,698


12,903








Property, plant and equipment - net

6,665


6,585


6,553

Goodwill

6,717


6,589


7,016

Other intangible assets - net

1,070


999


1,031

Investments in partially-owned affiliates

1,043


1,024


1,015

Other noncurrent assets

2,611


2,623


2,789


Total assets

$         30,832


$         31,518


$          31,307








LIABILITIES AND EQUITY






Short-term debt and current portion of long-term debt

$           1,804


$              938


$            1,035

Accounts payable and accrued expenses

6,609


7,533


6,811

Liabilities held for sale

321


402


-

Other current liabilities

3,069


3,244


2,922


Current liabilities

11,803


12,117


10,768








Long-term debt

4,866


4,560


5,413

Other noncurrent liabilities

2,202


2,110


2,768

Redeemable noncontrolling interests

169


157


270

Shareholders' equity attributable to JCI

11,531


12,314


11,933

Noncontrolling interests

261


260


155


Total liabilities and equity

$         30,832


$         31,518


$          31,307















 

JOHNSON CONTROLS, INC.








CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)



















Three Months Ended December 31,





2013


2012 (Revised)

Operating Activities




Net income attributable to JCI

$ 469


$ 359

Income attributable to noncontrolling interests

36


30








Net income

505


389








Adjustments to reconcile net income to cash provided (used) by operating activities:





Depreciation and amortization

244


223


Pension and postretirement benefit expense (income)

9


(16)


Pension and postretirement contributions

(25)


(16)


Equity in earnings of partially-owned affiliates, net of dividends received

(74)


(48)


Deferred income taxes

14


(5)


Fair value adjustment of equity investment

(19)


-


Other

10


13


Changes in assets and liabilities, excluding acquisitions and divestitures:






Receivables

531


241



Inventories

(95)


(28)



Restructuring reserves

(62)


(34)



Accounts payable and accrued liabilities

(932)


(167)



Change in other assets and liabilities

(387)


(254)




Cash provided (used) by operating activities

(281)


298















Capital expenditures

(345)


(371)

Sale of property, plant and equipment

21


17

Acquisition of businesses, net of cash acquired

(128)


-

Business divestitures

13


-

Other

8


(11)




Cash used by investing activities

(431)


(365)








Financing Activities




Increase in short and long-term debt - net

1,163


373

Stock repurchases

(1,199)


-

Payment of cash dividends

(130)


(253)

Proceeds from the exercise of stock options

84


34

Other

4


1




Cash provided (used) by financing activities

(78)


155

Effect of exchange rate changes on cash and cash equivalents

(19)


(39)

Cash held for sale

(1)


-

Increase (decrease) in cash and cash equivalents

$ (810)


$ 49















 

FOOTNOTES

1. Business Unit Summary


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 $8 million ($0.00) for the fiscal 2013 first quarter.



Three Months Ended



(in millions)

December 31,




2013


2012 (Revised)


%


(unaudited)





Net Sales






Building Efficiency

$    3,381


$             3,532


-4%

Automotive Experience

5,755


5,214


10%

Power Solutions

1,772


1,676


6%

               Net Sales

$  10,908


$           10,422









Segment Income(1) 






Building Efficiency

$       146


$                172


-15%

Automotive Experience

232


101


130%

Power Solutions

308


276


12%

               Segment Income

$       686


$                549









Net financing charges

(55)


(61)



Income before income taxes

$       631


$                488









Net Sales






Products and systems

$    8,939


$             8,357


7%

Services

1,969


2,065


-5%


$  10,908


$           10,422









Cost of Sales






Products and systems

$    7,630


$             7,207


6%

Services

1,621


1,699


-5%


$    9,251


$             8,906









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. Income Taxes


The effective tax rate for the first quarter of fiscal 2014 and fiscal 2013 is 20 percent.


3. Share Repurchase Program


In November 2013, the Company's Board of Directors authorized a $3 billion increase in the share repurchase program; bringing the total authorized amount under the repurchase program to $3.65 billion.  The share repurchase program does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.  During the first quarter of fiscal 2014, the Company repurchased approximately $1.2 billion under these authorizations. 


4. Sale of Automotive Electronics


In January 2014, the Company signed a definitive agreement to sell its Automotive Experience Electronics business to Visteon Corporation for $265 million.  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 December 31, 2013 and September 30, 2013. 


5. 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


December 31,


2013


2012 (Revised)


(unaudited)

Income Available to Common Shareholders








Basic and diluted income available to common


shareholders

$       469


$                359









Weighted Average Shares Outstanding



Basic weighted average shares outstanding

674.1


683.1

Effect of dilutive securities:




     Stock options and unvested restricted stock

8.1


3.6

Diluted weighted average shares outstanding

682.2


686.7

 

SOURCE Johnson Controls, Inc.



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