Q4 earnings down, net income up for Johnson Controls

Jan. 1, 2020
Automotive Experience sales in the quarter declined 14% to $3.5 billion versus $4.1 billion last year due to lower production volumes in North America and Europe.

Johnson Controls reported fiscal 2009 fourth quarter net sales of $7.9 billion and diluted earnings per share of $0.47. Segment income was $409 million versus $605 million in the 2008 fourth quarter. Excluding non-recurring items, earnings per share were $0.52 compared with $0.73 in the 2008 period.

Net income in the 2009 fourth quarter was $300 million ($0.47 per diluted share), compared with $16 million ($0.03 per diluted share) a year ago.

"We entered 2009 with two of our markets already depressed — North American automotive and residential HVAC. As the year progressed, we navigated through customer and supplier bankruptcies and deteriorating global economic conditions," said Johnson Controls Chairman and CEO Steve Roell. "We responded throughout the year with actions to significantly improve our cost structure and liquidity."

Roell continued, "I am proud that we continued to invest in our growth initiatives and in increasing our competitive advantage despite the difficult conditions. The benefits of these actions are evident in our fourth quarter results, which represent the second sequential quarter of improved profitability. We have undergone a period of significant change, and I thank our employees and management team for their commitment and their accomplishments in 2009."

For the 2009 fiscal year, Johnson Controls sales totaled $28.5 billion compared to $38.1 billion for 2008.

Automotive results

Automotive Experience sales in the quarter declined 14% to $3.5 billion versus $4.1 billion last year due to lower production volumes in North America and Europe. Excluding the impact of foreign currency, revenues declined 12%.

Automotive Experience returned to profitability in the fourth quarter with segment income of $77 million due primarily to the company's improved cost structure. These results represent the second sequential quarterly improvement by the business, which was profitable in all geographic regions in the 2009 fourth quarter.

Power Solutions sales in the fourth quarter were $1.1 billion, down 17% from $1.3 billion in the year ago period. Excluding the impact of lower lead prices and currency translation, sales were comparable to last year, as were unit shipments. Segment income was $194 million in the fourth quarter, up 37% from $142 million last year as a result of operational efficiencies and a favorable product mix. The 2008 quarter results also included the negative impact of commodity costs.

Johnson Controls said that in the fourth quarter it received the single largest grant, $299 million, from the United States Department of Energy under the American Recovery and Reinvestment Act (ARRA) to build domestic manufacturing capacity for advanced batteries for hybrid and electric vehicles. Johnson Controls also said it had secured new hybrid battery agreements with Jaguar Landrover and Volkswagen and that it expects to announce additional new business in early 2010.

2010 Outlook

In 2010, Johnson Controls anticipates a sales increase of 9%, to approximately $31 billion. Earnings are expected to increase to approximately $1.35 - $1.45 per diluted share, significantly higher than 2009. Sales, earnings and margin improvements are expected in all three of its businesses in 2010.

The company's 2010 expectations are the result of higher global automotive production forecasts in 2010 than in 2009 and a resumption of higher growth rates in global emerging markets. Building Efficiency markets are expected to improve beginning in the second half of the fiscal year, particularly as government stimulus-funded projects have an increasingly meaningful impact on revenues. In addition, Johnson Controls said that cost structure improvements taken in the last year are expected to provide an increasing benefit to the company's profitability.

"Our strategies and offerings enable us to take advantage of the global growth megatrends around energy efficiency, sustainability and the emerging markets," Mr. Roell said. "Johnson Controls has the global presence and customer relationships that allow us to continue to lead industry change. We have the financial strength to accelerate our investments in growth, both organically as well as through acquisitions. We believe we have positioned the company for the sustainable, profitable growth that has long been a hallmark of Johnson Controls."