Johnson Controls Reports 2009 First Quarter Financial Results
MILWAUKEE, Wis., January 16, 2009: For the first quarter of fiscal 2009, Johnson Controls reported net sales of $7.3 billion and a loss of $608 million. Excluding non-recurring, non-cash charges, the loss in the quarter was $82 million, or $0.14 per diluted share. The company announced on December 16, 2008 that it expected a loss in the quarter.
These results compare with net sales of $9.5 billion and income of $235 million, or $0.39 per diluted share, for the first quarter of 2008.
The $562 million of non-recurring charges include: -- $110 million asset impairment in the automotive business -- $152 million equity investment impairment in the North American residential HVAC unitary products group -- $300 million tax valuation allowance"While we are disappointed to report a loss in the quarter, we are addressing the challenges by improving our cost structure and preserving our liquidity," said Stephen A. Roell, Johnson Controls Chairman and Chief Executive Officer. "We continue to invest in our businesses to provide long- term value to our customers."
Building Efficiency sales in the 2009 first quarter were $3.1 billion, down 5% from $3.2 billion versus last year. Excluding the effect of currency, sales were up slightly. Higher North America systems sales were more than offset by double-digit declines in the North American residential HVAC business and in Europe. Johnson Controls noted that it was experiencing some softness in the global new construction markets. Due to its high concentration in the still-strong institutional buildings market, however, the company reported that its backlog of uncompleted contracts in the first quarter was $4.7 billion, up 7% versus the previous year. Johnson Controls said that the North American residential market was markedly worse in the first quarter compared with the already depressed demand of a year ago.
The Building Efficiency segment, excluding impairment charges of $152 million, reported segment income of $131 million, down 20% compared to $163 million in 2008. Double-digit increases in North America systems and services income were more than offset by lower profitability in Europe and a loss in its North American residential business.
During its first fiscal quarter, Johnson Controls was selected by the United States Department of Energy as one of 16 companies to participate in an $80 billion contract to improve energy efficiency projects in Federal Buildings. The company said it had expanded its government sales force to take advantage of the significant growth opportunities for efficiency retrofits in the government market.
Power Solutions sales in the first quarter were $1.1 billion, down 32% from $1.7 billion in the year ago period, primarily reflecting the impact of lower lead prices as well as lower volumes. Original equipment automotive battery volume was negatively impacted by the decline in global auto production rates, while aftermarket demand was softer due to lower stocking levels and deferred orders at certain aftermarket customers.
Power Solutions segment income was $40 million, down 70% from $133 million last year partially due to the lower volumes. Additionally, the inventory revaluation of used batteries that had been purchased when lead prices were significantly higher, also negatively impacted income by approximately $50 million in the quarter. This impact is non-recurring.
The company announced today a contract with O'Reilly Auto Parts, a new customer for Johnson Controls. Shipments will begin in February to more than 1,000 Checker Auto Parts, Kragen Auto Parts and Schuck's Auto Supply stores nationally.
Automotive Experience sales in the quarter declined 32% to $3.1 billion versus $4.6 billion last year due to significantly lower production volumes globally. Automotive production in North America was down 30% versus a year ago to a level not seen in more than 25 years. European production declined significantly and the company said it continues to receive notifications of significant production cuts. Excluding currency, sales declined 25%.
The Automotive Experience segment reported a loss of $329 million. Excluding the impairment charge, the loss in the current quarter was $219 million versus a profit of $78 million in the 2008 period, due to the lower global volumes. The company said it expects a loss in the segment in the second fiscal quarter with an expected return to profitability in the second half of the year. North American production levels in the second quarter are expected to be 46% below the prior year levels.
Johnson Controls said it expects to report a overall loss in its fiscal second quarter similar in scale to the first quarter's operating loss but with improved performance by its Building Efficiency and Power Solutions businesses. It also said its previously announced restructuring program is progressing according to plan. It is expected that the financial benefits of the restructuring program will provide an accelerating accretive impact to earnings beginning in the company's 2009 second quarter.
"The market environment and uncertainties we face are expected to continue in the second quarter," Mr. Roell said. "We are implementing strategies to take advantage of opportunities in the marketplace. I would like to thank our employees worldwide for their dedication and commitment through these challenging times. With their help, we believe we will emerge from this economic cycle with a significantly advantaged competitive position."