MILWAUKEE – For the third quarter of fiscal 2013, Johnson Controls reported net income of $571 million, up 32 percent over last year. Revenues increased by 2 percent, to $10.8 billion. Diluted earnings per share were 83 cents compared with 63 cents per share in the third quarter of fiscal 2012.
"We are pleased with the significant improvement in profitability of all three businesses in the third quarter. Our initiatives to reduce costs and improve operational efficiencies continue to gather momentum and deliver margin expansion," said Stephen Roell, Johnson Controls chairman and CEO. "Despite a challenging production environment, our European automotive business generated a profit in the quarter and profitability improved in our automotive metals business. Cash flow in the quarter was very strong, enabling us to reduce net debt by more than $550 million. I’d like to recognize the support of our 168,000 employees and thank them for a very good quarter."
The company’s Power Solutions segment revenue rose 8 percent to $1.4 billion, compared to $1.3 billion last year. While the company’s global unit shipments were higher than the last-year period, Johnson Controls said that industry-wide aftermarket battery demand was weaker than expected in both North America and Europe. Power Solutions segment income was $171 million, 12 percent higher than $153 million in the same quarter last year due to the higher volumes, an improved product mix and the incremental contribution from the company’s battery recycling facility in South Carolina.
The company said that in the third quarter, it was awarded new battery business in North America totaling approximately 1 million incremental units per year. Additionally, it also announced that on July 1, 2013, it implemented a 3 to 4 percent price increase on aftermarket batteries in North America to offset higher acquisition costs for spent battery cores, which are the key source of lead for recycling within its material supply chain.
Automotive Experience sales in the 2013 third quarter were $5.7 billion, up 4 percent compared to the 2012 third quarter, as higher auto production in North America and Asia was partially offset by lower volumes in Europe. Automotive industry production in the quarter increased 6 percent in North America and declined 1 percent in Europe. Revenues in China, which are primarily related to seating and generated through non-consolidated joint ventures, increased 23 percent to $1.4 billion.
Automotive Experience segment income was $279 million, 33 percent higher than the same quarter last year with higher profitability in all three automotive segments. The company said third quarter income from its European automotive business was $11 million, a significant sequential quarterly improvement from the loss by the business in the second quarter of the year.
Status Of Automotive Electronics Divestiture
This week, the company announced that signed a definitive agreement to sell its automotive electronics’ HomeLink product line to Gentex Corp. of Zeeland, Mich., for approximately $700 million. The transaction is expected to close in late fourth quarter to early fiscal 2014. Johnson Controls said that the continuing process to sell the remainder of its electronics business is progressing as planned and that it is targeting an announcement of a definitive agreement on or before its 2013 fourth quarter earnings release date. Johnson Controls said that separating HomeLink from the rest of the electronics business is expected to maximize value as the individual businesses offer distinct advantages and synergies for different sets of strategic buyers.
The company expects fiscal fourth quarter 2013 earnings to be 93 cents to 95 cents, resulting in full fiscal year earnings of $2.64 to $2.66 per share. The company also said it expects strong free cash flow generation from operations to continue and anticipates that its fourth quarter net debt reduction will be approximately $600 to $650 million, excluding divestiture proceeds.
"Earlier this fiscal year, we said that our second half performance would be positively impacted by our restructuring initiatives, sequential improvements in Automotive Experience European and South American businesses, and profitability initiatives in building efficiency. We expect the benefits of these actions to deliver further improvements in our fourth fiscal quarter," said Roell. "We are confident in our ability to increase our earnings, strengthen our balance sheet and deliver shareholder value."
