Johnson Controls Reports 2012 Fourth Quarter Earnings In-Line with Previous Guidance and Record Full-Year Results

MILWAUKEE, Oct. 30, 2012 /PRNewswire/ -- For the fiscal 2012 fourth quarter, Johnson Controls (NYSE: JCI) reported a net loss of $8 million, or $0.01 per share, on $10.4 billion in revenues. Excluding restructuring and non-recurring items in the 2012 and 2011 fiscal fourth quarters, highlights include:

  • Net revenues of $10.4 billion vs. $10.8 billion in Q4 2011, down 4 percent
    • Excluding the impact of foreign exchange, revenues increased 1 percent
  • Income from business segments of $726 million compared with $741 million a year ago, down 2 percent.
  • Net income of $526 million versus $523 million in Q4 2011
  • Diluted earnings per share of $0.77 versus $0.76 in the same quarter last year

Johnson Controls said it believes that using the adjusted numbers provides a more meaningful comparison of its underlying operating performance.

Previously announced items that impacted reported Q4 2012 and Q4 2011 earnings include:

2012 fourth quarter:

  • A $245 million ($228 million after-tax) restructuring charge, resulting in a net charge of $0.33 per diluted share.
  • A non-cash mark-to-market charge of $447 million ($271 million after-tax) associated with an accounting change for pension and retiree medical benefits. The adjustment, resulting in a net charge of $0.40 per diluted share, was due to a significant year-over-year decline in discount rates used to estimate the associated liability.
  • A $35 million tax charge related to discontinuing lead-processing operations at its Shanghai, China battery plant.

2011 fourth quarter:

  • Results have been revised to include a non-cash mark-to-market charge of $479 million ($313 million after tax) or $0.45 per diluted share. The revision is associated with the accounting change for pension and retiree medical benefits.
  • Restructuring charges, an equity affiliate net gain and a tax valuation allowance release had a net positive impact of $0.03 per diluted share.

"While the macro-economic environment was challenging, in the fourth quarter we significantly improved profitability in Building Efficiency, Power Solutions and North America Automotive Experience. European automotive and buildings markets continued to soften in the quarter, offsetting our gains elsewhere," said Stephen A. Roell, Johnson Controls Chairman and Chief Executive Officer. "In response to the challenges in some of our key markets, we recently announced restructuring actions. We believe these initiatives better align resources with our current strategies and will help us to increase profitability in what we expect will be a low-growth environment next year."

Business segments, excluding restructuring and non-recurring items (non-GAAP)

Building Efficiency realized higher segment income despite a soft global market environment. Sales in the fiscal 2012 fourth quarter were $3.8 billion, declining 7 percent (down 4 percent excluding currency) from $4.1 billion in the same quarter last year as higher revenues in Asia were more than offset by lower sales in North America, Europe, and the Middle East. Residential HVAC sales increased 9 percent as demand was positively impacted by the record high temperatures in North America.

While orders in the quarter were 10 percent lower year-over-year, the backlog of projects at the end of the quarter, excluding foreign exchange, increased 3 percent to $5.2 billion led by strength in North America Systems and Asia.

Building Efficiency segment income was $327 million, up 15 percent from $285 million in the fiscal 2011 fourth quarter, boosted by SG&A reductions. North America Service segment income increased 62 percent due primarily to improved pricing and better labor utilization. North America Systems income was 22 percent higher due to improved productivity and operational efficiencies.

Despite lower sales, Building Efficiency segment margin improved 160 basis points to 8.6 percent versus the same period last year, led by gains in North America Systems and North America Service.

Automotive Experience continued to be adversely affected by weakness in Europe. Sales in the quarter fell 2 percent (up 3 percent excluding currency) to $5.0 billion versus $5.1 billion last year as higher production volumes in North America and Asia and new program launches were more than offset by a weaker Euro and lower production volumes in Europe.

North American automotive revenues increased 13 percent to $2.2 billion from $1.9 billion last year, which is in line with the increase in overall industry production. European sales were down 15 percent to $2.2 billion from $2.6 billion in the fiscal 2011 fourth quarter. Excluding the impact of foreign exchange, European sales were down 5 percent versus last year, compared with a 3 percent decline in industry production. Sales in Asia increased 2 percent (+4% excluding currency) to $663 million from $650 million in the fourth quarter of fiscal 2011. Total revenues in China, including non-consolidated joint ventures, rose 21 percent to $1.3 billion compared with $1.1 billion a year ago.

Automotive Experience reported segment income of $159 million in the current quarter, down 34 percent from $240 million the prior year. Significant improvement in North America and Asia was more than offset by lower European results. North America earnings improved significantly in the current quarter to $130 million from $83 million a year ago due primarily to the higher production levels and improved operational efficiencies. Segment income in Asia was $97 million, up 18 percent from the fiscal 2011 fourth quarter primarily due to higher revenues and stronger profitability in Japan and Korea. Automotive Europe reported a loss of $68 million in the quarter compared to a profit of $75 million last year as a result of the lower volumes, operational challenges and commercial negotiations.

Power Solutions posted solid income gains in the quarter. Sales in the fourth quarter of 2012 were unchanged (up 8 percent excluding currency and lead) at $1.6 billion versus the same period last year. Unit shipments rose 4 percent, split evenly between global aftermarket and OEM. Solid growth with North American OEMs, increased market share gains in the European aftermarket, and strength in Asia were partially offset by continued soft aftermarket demand in North America and lower shipments to European OEMs.

Power Solutions segment income rose 11 percent to $240 million versus $216 million in the fourth quarter of fiscal 2011 due primarily to the benefits of increased vertical integration and improved pricing. The company's South Carolina lead recycling facility became operational during the quarter. Despite the headwind of higher year-over-year costs for battery cores used for recycling, Power Solutions segment margin rose 160 basis points to 15.4 percent versus the same period last year.

Fiscal 2013 outlook

Johnson Controls today gave a preliminary outlook of its market and financial expectations for fiscal 2013, saying it believes softening end markets and negative foreign currency will limit its ability to grow revenues and earnings in the upcoming year. It also anticipates a higher effective tax rate of 20% in 2013 due to an increased percentage of total earnings coming from the United States. The company expects 2013 first-half earnings to be significantly lower than the same period of 2012 with higher year-over-year earnings in the second half of the year. It added that it believes the financial benefits of the restructuring announced in the current quarter will begin to accrue in the second half of fiscal 2013. The company expects full-year 2013 earnings to be flat to slightly higher than 2012. Johnson Controls will provide additional fiscal year 2013 guidance at its annual New York analyst day on December 19, 2012.

"As we look forward to fiscal 2013, we are expecting continued challenges in our end markets. We will benefit from our automotive and buildings backlogs, but we expect limited opportunity for top-line growth in the coming year," said Mr. Roell. "We will be diligent in controlling costs, but remain committed to making investments that support our long-term growth and profitability strategies and will drive improvements in shareholder value."

"Lastly, I would like to thank our 170,000 Johnson Controls employees around the world for delivering record sales and earnings in fiscal 2012 in a difficult environment," Mr. Roell said.


Johnson Controls, Inc. has made statements in this document that are forward-looking and, therefore, are subject to risks and uncertainties. All statements in this document other than statements of historical fact are statements that are, or could be, deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this document, statements regarding future financial position, sales, costs, earnings, cash flows, other measures of results of operations, capital expenditures or debt levels and plans, objectives, outlook, targets, guidance or goals are forward-looking statements. Words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "forecast," "project" or "plan" or terms of similar meaning are also generally intended to identify forward-looking statements. Johnson Controls cautions that these statements are subject to numerous important risks, uncertainties, assumptions and other factors, some of which are beyond the company's control, that could cause Johnson Controls' actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the strength of the U.S. or other economies, automotive vehicle production levels, mix and schedules, energy and commodity prices, availability of raw materials and component products, currency exchange rates, and cancellation of or changes to commercial contracts, as well as other factors discussed in Item 1A of Part I of Johnson Controls' most recent Annual Report on Form 10-K for the year ended September 30, 2011 and Johnson Controls' subsequent Quarterly Reports on Form 10-Q. Shareholders, potential investors and others should consider these factors in evaluating the forward-looking statements and should not place undue reliance on such statements. The forward-looking statements included in this document are only made as of the date of this document, and Johnson Controls assumes no obligation, and disclaims any obligation, to update forward-looking statements to reflect events or circumstances occurring after the date of this document.

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