Johnson Controls Reports Record 2008 Results

MILWAUKEE, Oct. 23 /PRNewswire-FirstCall/ -- Johnson Controls, Inc.
(NYSE: JCI) today reported record sales of $38.1 billion for its 2008 fiscal
year, up 10% from $34.6 billion in 2007, reflecting growth in the company's
Building Efficiency, Power Solutions and Automotive Experience businesses.
(Logo: http://www.newscom.com/cgi-bin/prnh/20070930/AQSU001LOGO)
"We achieved a record year with solid profitability despite the
unprecedented market challenges and economic volatility," said Chairman and
Chief Executive Officer Stephen A. Roell. "In recognition of the difficult
environment, we took pre-emptive action in the fourth fiscal quarter to
improve and better align our cost structure with future market conditions.
This will improve our long-term profitability and further enhance our
competitive advantage."
Net income for the year totaled $979 million with diluted earnings per
share from continuing operations of $1.63.
Segment income, which excludes the previously announced $495 million
restructuring charge, increased 10% to $2.1 billion versus $1.9 billion last
year. Excluding the charge, net income totaled $1.4 billion, up 8% from $1.3
billion in 2007. Diluted earnings per share from continuing operations were
$2.33 compared to $2.10 ($2.16 including the impact of 2007 non-recurring tax
adjustments).
Fourth Quarter Results
For the 2008 fourth quarter, the company reported record sales of $9.3
billion, an increase of 3% versus $9.0 billion last year as a result of higher
Building Efficiency and Power Solutions revenues. Net income was $16 million,
with diluted earnings per share of $0.03.
Segment income for the 2008 quarter was $605 million, down 8% from $660
million in 2007. Net income excluding the restructuring charge was $439
million, 6% lower than $466 million in the prior year. Diluted earnings per
share from continuing operations were $0.73 versus $0.78 last year, in-line
with the company's forecasts. As expected, higher commodity costs and costs
associated with the Plastech joint venture reduced earnings by a total of
$0.09 in the 2008 quarter.
Building efficiency sales were $3.9 billion, up 8% compared with 2007
revenues of $3.6 billion. The increase reflects higher Global Workplace
Solutions and North American systems sales as well as growth in Europe and
other international markets. Segment income was $316 million, level with 2007
as the benefits of higher volume and improved underlying margins were offset
by the timing of commodity cost recoveries and the costs associated with
growth investments in its sales force and information technology. The backlog
of uncompleted commercial systems and services contracts at September 30, 2008
was $4.7 billion, 12% higher than the prior year amount reflecting increasing
demand for energy efficiency projects, particularly in the U.S. Federal
government and education markets.
Automotive experience sales in the quarter were $4.1 billion, 2% lower
than $4.2 billion in 2007. North American sales decreased 12%, less than the
overall industry vehicle production decrease of 17% due to the incremental
revenues associated with the Plastech joint venture. European sales increased
4%, however, excluding the impact of currency, sales decreased 6%,
approximately in line with industry production. Sales in the Asia/Pacific
region increased 8% due to higher volumes in Japan. Segment income was $147
million, down 20% from $183 million last year. The decrease reflects the
impacts of the lower North American volume, the costs associated with Plastech
and higher launch costs in support of new automotive interior programs, which
more than offset significant improvements in operating performance globally.
Power solutions sales increased 7% in the 2008 quarter to $1.34 billion
from $1.25 billion last year due to higher unit selling prices. Unit volumes
were slightly lower due to lower automotive production levels. Segment income
declined to $142 million, down 12% from $161 million in the 2007 fourth
quarter due to higher non-lead commodity costs.
2009 Outlook
The company re-affirmed the fiscal 2009 guidance it provided on October
14, 2008, for diluted earnings per share of $1.95 to $2.10.
For the first quarter of fiscal 2009, the company said it expects earnings
of $0.22 to $0.24 per diluted share, down from $0.39 in the 2008 quarter.
The first quarter forecast reflects expected increases in Building
Efficiency and Power Solutions income due to higher underlying revenues and
operational improvements in both businesses. These improvements are expected
to be more than offset by a loss in the Automotive Experience business as a
result of sharply lower automotive production in North America and Europe and
the costs associated with restructuring initiatives. The company forecasts
that its automotive results will improve sequentially throughout the year as
vehicle production stabilizes, commodity prices decrease and cost reductions
gain momentum.
"While we face uncertainties in 2009, we begin the year in a strong
position with record backlogs in our automotive and buildings businesses,
global market leadership and our proven ability to improve our cost
structure," said Mr. Roell. "Johnson Controls will aggressively execute on our
strategies and continue to invest for sustainable long-term growth."
Johnson Controls (NYSE: JCI) is the global leader that brings ingenuity to
the places where people live, work and travel. By integrating technologies,
products and services, we create smart environments that redefine the
relationships between people and their surroundings. Our team of 140,000
employees creates a more comfortable, safe and sustainable world through our
products and services for more than 200 million vehicles, 12 million homes and
one million commercial buildings. Our commitment to sustainability drives our
environmental stewardship, good corporate citizenship in our workplaces and
communities, and the products and services we provide to customers. For
additional information, please visit http://www.johnsoncontrols.com/.
Johnson Controls, Inc. ("the Company") has made forward-looking statements
in this presentation pertaining to its financial results for fiscal 2009 and
beyond that are based on preliminary data and are subject to risks and
uncertainties. All statements other than statements of historical fact are
statements that are or could be deemed forward-looking statements and include
terms such as "outlook," "expectations," "estimates," or "forecasts." For
those statements, the Company cautions that numerous important factors, such
as automotive vehicle production levels, mix and schedules, financial distress
of key customers, energy prices, the strength of the U.S. or other economies,
currency exchange rates, cancellation of or changes to commercial contracts,
liquidity, the ability to execute on restructuring actions according to
anticipated timelines and costs as well as other factors discussed in Item 1A
of Part II of the Company's most recent Form 10-Q filing (filed August 8,
2008) could affect the Company's actual results and could cause its actual
consolidated results to differ materially from those expressed in any forward-
looking statement made by, or on behalf of, the Company.

JOHNSON CONTROLS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)

Three Months Ended September 30,
2008 2007
Actual Actual

Net sales $9,307 $9,011
Cost of sales 7,883 7,586
Gross profit 1,424 1,425

Selling, general and administrative expenses (850) (786)
Restructuring costs (495) -
Financing charges - net (54) (68)
Equity income 31 21

Income from continuing operations before
income taxes and minority interests 56 592

Provision for income taxes 55 124
Minority interests in net earnings
(loss) of subsidiaries (15) (1)

Income from continuing operations 16 469

Loss on sale of discontinued
operations, net of income taxes - (3)

Net income $16 $466

Diluted earnings per share from
continuing operations $0.03 $0.78

Diluted earnings per share $0.03 $0.77

Diluted weighted average shares 600 603
Shares outstanding at period end 594 603

JOHNSON CONTROLS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data; unaudited)

Twelve Months Ended September 30,
2008 2007
Actual Actual

Net sales $38,062 $34,624
Cost of sales 32,536 29,548
Gross profit 5,526 5,076

Selling, general and administrative expenses (3,565) (3,281)
Restructuring costs (495) -
Financing charges - net (258) (277)
Equity income 116 89

Income from continuing operations before
income taxes and minority interests 1,324 1,607

Provision for income taxes 321 300
Minority interests in net earnings of
subsidiaries 24 12

Income from continuing operations 979 1,295

Loss from discontinued operations,
net of income taxes - (43)

Net income $979 $1,252

Diluted earnings per share from
continuing operations $1.63 $2.16

Diluted earnings per share $1.63 $2.09

Diluted weighted average shares 601 599
Shares outstanding at period end 594 603

JOHNSON CONTROLS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in millions; unaudited)

September 30, September 30,
2008 2007
ASSETS
Cash and cash equivalents $384 $674
Accounts receivable - net 6,472 6,600
Inventories 2,099 1,968
Other current assets 1,955 1,630
Current assets 10,910 10,872

Property, plant and equipment - net 4,389 4,208
Goodwill 6,545 6,131
Other intangible assets - net 769 773
Investments in partially-owned
affiliates 863 795
Other noncurrent assets 1,842 1,326
Total assets $25,318 $24,105

LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion
of long-term debt $743 $1,163
Accounts payable and accrued expenses 6,353 6,440
Other current liabilities 2,637 2,317
Current liabilities 9,733 9,920

Long-term debt 3,201 3,255
Minority interests in equity of
subsidiaries 236 128
Other noncurrent liabilities 2,737 1,895
Shareholders' equity 9,411 8,907
Total liabilities and
shareholders' equity $25,318 $24,105

JOHNSON CONTROLS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)

Three Months Ended September 30,
2008 2007
Operating Activities
Net income $16 $466

Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 202 164
Equity in earnings of partially-
owned affiliates, net of
dividends received (25) 23
Deferred income taxes (82) (17)
Minority interests in net
earnings (loss) of subsidiaries (15) (1)
Non-cash restructuring costs 43 -
Pension contributions in excess
of expense (75) -
Other - net 16 14
Changes in working capital, excluding
acquisition and divestiture of businesses:
Receivables 21 (138)
Inventories 158 42
Restructuring reserves 430 (38)
Accounts payable and accrued liabilities (61) 659
Change in other assets and liabilities 272 (108)
Cash provided by operating activities 900 1,066

Investing Activities
Capital expenditures (256) (246)
Sale of property, plant and equipment 10 38
Acquisition of businesses, net of
cash acquired (204) -
Business divestitures - 54
Other - net (44) (260)
Cash used in investing activities (494) (414)

Financing Activities
Decrease in short and long-term debt - net (184) (221)
Payment of cash dividends (77) -
Other - net (17) 54
Cash used in financing activities (278) (167)

Increase in cash and cash equivalents $128 $485

JOHNSON CONTROLS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)

Twelve Months Ended September 30,
2008 2007
Operating Activities
Net income $979 $1,252

Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 783 732
Equity in earnings of partially-
owned affiliates, net of
dividends received (15) (1)
Deferred income taxes (155) (63)
Minority interests in net
earnings of subsidiaries 24 12
Non-cash restructuring costs 43 -
Pension contributions in excess of expense (93) (18)
Loss on sale of discontinued operations - 33
Other - net 96 73
Changes in working capital, excluding
acquisition and divestiture of businesses:
Receivables 281 (617)
Inventories (49) (150)
Restructuring reserves 388 (161)
Accounts payable and accrued liabilities (594) 1,070
Change in other assets and liabilities 240 (249)
Cash provided by operating activities 1,928 1,913

Investing Activities
Capital expenditures (807) (828)
Sale of property, plant and equipment 52 83
Acquisition of businesses, net of cash acquired (277) (17)
Business divestitures - 89
Other - net (238) (378)
Cash used in investing activities (1,270) (1,051)

Financing Activities
Decrease in short and long-term debt - net (522) (433)
Payment of cash dividends (297) (195)
Other - net (129) 147
Cash used in financing activities (948) (481)

Increase (decrease) in cash and
cash equivalents $(290) $381

FOOTNOTES

1. Business Unit Summary
Three Months Ended Twelve Months Ended
September 30, September 30,
(in millions) (unaudited) (unaudited)
2008 2007 % 2008 2007 %
Net Sales
Building efficiency $3,901 $3,605 8% $14,121 $12,737 11%
Automotive experience 4,064 4,156 -2% 18,091 17,552 3%
Power solutions 1,342 1,250 7% 5,850 4,335 35%
Net Sales $9,307 $9,011 $38,062 $34,624

Segment Income
Building efficiency $316 $316 0% $957 $850 13%
Automotive experience 147 183 -20% 579 519 12%
Power solutions 142 161 -12% 541 515 5%
Segment Income $605 $660 $2,077 $1,884

Restructuring costs (495) - (495) -
Financing charges - net (54) (68) (258) (277)
Income from continuing
operations before
income taxes and
minority interests $56 $592 $1,324 $1,607

Net Sales
Products and systems $7,297 $7,105 3% $30,568 $27,848 10%
Services 2,010 1,906 5% 7,494 6,776 11%
$9,307 $9,011 $38,062 $34,624

Cost of Sales
Products and systems $6,266 $6,064 3% $26,492 $24,107 10%
Services 1,617 1,522 6% 6,044 5,441 11%
$7,883 $7,586 $32,536 $29,548

Building efficiency - Provides facility systems and services including
comfort, energy and security management for the non-residential buildings
market and provides heating, ventilating, and air conditioning products and
services for the residential and non-residential building markets.
Automotive experience - Designs and manufactures interior systems and
products for passenger cars and light trucks, including vans, pick-up trucks
and sport/crossover utility vehicles.
Power solutions - Services both automotive original equipment
manufacturers and the battery aftermarket by providing advanced battery
technology, coupled with systems engineering, marketing and service expertise.
Beginning in fiscal year 2007, company management, including the chief
operating decision maker, adjusted their measurement of business unit
performance, changing from operating income to segment income, which
represents income from continuing operations before income taxes and minority
interests excluding restructuring charges and net financing charges. The
primary reason for the modification was to reflect equity income in earnings
for each business operation given its growing significance to the company's
global business strategies.
2. Acquisitions
On July 1, 2008, the company announced the acquisition of the interior
product assets of Plastech Engineered Products, Inc. (Plastech), which filed
for bankruptcy in February 2008. The company owns 70% of the new entity with
certain Plastech term lenders holding the minority portion. The cost of the
acquisition, net of cash acquired, was approximately $169 million.
3. Discontinued Operations
In the second quarter and fourth quarter of fiscal year 2007, the company
recorded losses of approximately $49 million ($30 million after-tax) and $4
million ($3 million after-tax), respectively, related to the sale of
businesses reported as discontinued operations, primarily Bristol Compressors.
4. Restructuring Costs
As part of its continuing efforts to reduce costs and improve the
efficiency of its global operations, the company announced a restructuring
plan in the fourth quarter of fiscal year 2008 and recorded a $495 million
restructuring charge.
The restructuring charge relates to cost reduction initiatives in its
automotive experience, building efficiency and power solutions businesses and
includes workforce reductions and plant consolidations. The company expects to
substantially complete the initiatives by early 2010. The automotive-related
restructuring is in response to the fundamentals of the European and North
American automotive markets. The actions target reductions in the company's
cost base by decreasing excess manufacturing capacity due to lower industry
production and the continued movement of vehicle production to low-cost
countries, especially in Europe. The restructuring actions in building
efficiency are primarily in Europe where the company is centralizing certain
functions and rebalancing its resources to target the geographic markets with
the greatest potential growth. Power solutions actions are focused on
optimizing its regional manufacturing capacity.
5. Income Taxes
In June 2006, FASB issued FASB interpretation No. 48, "Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109"
(FIN 48). FIN 48 prescribes a comprehensive model for how a company should
recognize, measure, present, and disclose in its financial statements
uncertain tax positions that a company has taken or expects to take on a tax
return. The company adopted FIN 48 as of October 1, 2007. Upon adoption, the
company increased its existing reserves for uncertain tax positions by $93
million. The increase was recorded as a cumulative effect adjustment to
shareholders' equity of $68 million and an increase to goodwill of $25 million
related to prior year business combinations. As of the adoption date, the
company had gross tax affected unrecognized tax benefits of $616 million of
which $475 million, if recognized, would affect the effective tax rate. Also
as of the adoption date, the company had accrued interest expense and
penalties related to the unrecognized tax benefits of $75 million (net of tax
benefit). The net change in interest and penalties during the twelve months
ended September 30, 2008 was not material. The company recognizes interest and
penalties related to unrecognized tax benefits as a component of income tax
expense or goodwill, when applicable.
In the second quarter and fourth quarters of fiscal year 2007, the company
reduced its income tax liability by $15 million and $13 million, respectively,
due to the favorable resolution of certain tax audits. The company's federal
income tax returns and certain foreign income tax returns for various fiscal
years remain under various stages of audit by the Internal Revenue Service and
respective foreign tax authorities. Although the outcome of tax audits is
always uncertain, management believes that it has appropriate support for the
positions taken on its tax returns and that its annual tax provisions included
amounts sufficient to pay assessments, if any, which may be proposed by the
taxing authorities. At September 30, 2007, the company has recorded a
liability for its best estimate of the probable loss on certain of its tax
positions, the majority of which is included in other noncurrent liabilities
in the condensed consolidated statements of financial position. Nonetheless,
the amounts ultimately paid, if any, upon resolution of the issues raised by
the taxing authorities, may differ materially from the amounts accrued for
each year.
In the second quarter of fiscal year 2007, the tax provision decreased as
a result of a $22 million tax benefit realized by a change in tax status of an
automotive experience subsidiary in the Netherlands.
In the fourth quarter of fiscal year 2007, the tax provision increased $20
million as a result of a change in the German federal income tax rate.
In the fourth quarter of fiscal year 2007, the tax provision decreased $7
million due to a nonrecurring tax benefit related to the use of a valuation
allowance with a joint venture.
In the fourth quarter of fiscal year 2008, the company recorded a $61
million discrete period tax benefit related to fourth quarter 2008
restructuring costs using a blended statutory tax rate of 12.4%.
The tables below show a reconciliation of the provision for income taxes
for the years ended September 30, 2008 and 2007 (in millions):

Year Ended Year Ended
September 30, 2008 September 30, 2007
Amount Tax Rate Amount Tax Rate
(unaudited) (unaudited)
Federal, state and
foreign income tax
expense $382 21.0% $337 21.0%

Uncertain tax positions - (28)
Change in tax status
of foreign subsidiary - (22)
Change in statutory tax
rates - 20
Valuation allowance
adjustments - (7)
Restructuring charge (61) -
Provision for income
taxes $321 24.2% $300 18.7%

6. Stock Split

On July 25, 2007, the company's Board of Directors declared a three-for-
one split of the company's common stock payable October 2, 2007 to
shareholders of record on September 14, 2007. All share and per share amounts
disclosed in this document have been restated to reflect the three-for-one
stock split. The stock split resulted in the issuance of approximately 396
million additional shares of common stock. In connection with the stock
split, the par value of the common stock was changed from $.04 1/6 per share
to $.01 7/18 per share.
SOURCE Johnson Controls, Inc.

media, Monica Levy, +1-414-524-2695, or investors, Glen Ponczak,
+1-414-524-2375, both of Johnson Controls, Inc.