Johnson Controls reported a profit of $0.26 per diluted share for the third quarter of 2009. Net sales in the quarter were $7.0 billion, with segment income of $282 million and net income of $163 million. These results compare with net sales of $9.9 billion, segment income of $645 million and net income of $439 million, or $0.73 per diluted share for the third quarter of 2008.
"In most of our global markets this quarter, economic conditions remain very challenging. I am pleased to report that despite this environment, we returned to solid profitability. The cost improvement initiatives we undertook earlier this year are providing the expected benefits. We believe the company is well positioned to further increase our profitability in our fourth quarter and into 2010." said Johnson Controls Chairman and Chief Executive Officer, Steve Roell.
Building Efficiency sales in the 2009 third quarter were $3.2 billion, down 14% from $3.7 billion last year. Excluding the effect of currency, sales were down 7%. In North America and Western Europe, systems and service revenues were lower, reflecting the overall slowdown in construction spending, lower HVAC equipment volumes and the continued deferral of discretionary maintenance and retrofit projects. In Eastern Europe, the Middle East and Latin America, revenue declines ranged from 10 to 15% excluding the impact of foreign exchange.
The quarter end backlog of uncompleted contracts was $4.4 billion, down 9%. Excluding the impact of foreign exchange the backlog was lower by 6%. The North America backlog was comparable to prior year levels, while there was a double-digit backlog decline in Europe and the Middle East.
The company said that it is bidding on approximately 2,700 projects worth approximately $800 million that are directly attributable to the American Reinvestment and Recovery Act (ARRA) stimulus package. To date, Johnson Controls has been awarded contracts totaling approximately $25 million under the ARRA. However, the company continues to see delays of projects where customers are waiting to determine their eligibility to receive funding. Johnson Controls said that while stimulus-related projects are being awarded at a slower than expected pace, it continues to believe the stimulus program will have a meaningful positive impact on financial performance in the second half of fiscal 2010.
Building Efficiency reported segment income of $190 million in the third quarter of fiscal 2009 compared to $301 million in 2008. Earnings were primarily impacted by lower volumes, particularly in Europe and emerging markets. In addition, unfavorable copper hedges lowered margins. The company noted that it is beginning to benefit from its European-focused restructuring activities. Fourth quarter earnings are expected to sequentially improve due to seasonal factors, the acceleration of cost reduction initiatives and an improved copper hedge position.
Power Solutions sales in the third quarter were $856 million, down 39% from $1.4 billion in the year ago period. Lower lead prices and currency translation negatively impacted revenues; overall unit volumes were 12% lower. Original equipment automotive battery volume was lower in both North America and Europe due to the decline in auto production levels.
Power Solutions segment income was $106 million in the third quarter, down 27% from $145 million last year. The company said the decline was due primarily to the lower unit volume. Income was also negatively impacted in the quarter by a $15 million charge associated with the sale of a former manufacturing facility and other fixed asset write-offs. Due to its cost reduction initiatives, Johnson Controls said it expects Power Solutions fourth quarter income to improve to 2008 levels despite the continued lower expected original equipment volumes.
The reported earnings per share reflect a diluted share count of 676 million shares in the 2009 quarter versus 601 million diluted shares in 2008. The increased 2009 share count is the result of the company’s equity-linked debt offerings in March 2009.
Earnings in the 2009 third quarter were positively impacted by a net non-recurring tax benefit of $9 million. Excluding these items, the company earned $0.25 per diluted share in third quarter.
