For the second quarter of fiscal 2014, Johnson Controls, Inc., 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. 

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.