Johnson Controls Reports 2009 Fourth Quarter Earnings; Affirms Forecast for Sales and Earnings Increases in 2010

Johnson Controls Reports 2009 Fourth Quarter Earnings; Affirms Forecast for
Sales and Earnings Increases in 2010

MILWAUKEE, Oct. 27 /PRNewswire-FirstCall/ -- Johnson Controls (NYSE: JCI)
today 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.

The $0.52 earnings per share is consistent with the quarterly guidance the
company issued on October 13, 2009.

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.

The 2009 fourth quarter net income amount includes the following previously
disclosed non-recurring items:
-- A pre-tax $105 million warranty charge in the residential HVAC
business.
-- A pre-tax charge of $111 million for costs associated with the
September
2009 debt exchange offer.

-- An income tax benefit of $114 million.

The 2008 fourth quarter net income amount included a pre-tax restructuring
charge of $495 million.

"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."

Mr. 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."

Business 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.

Building Efficiency sales in the 2009 fourth quarter were $3.3 billion, down
16% from $3.9 billion versus last year. In all of its global markets, systems
and service revenues were lower, reflecting the overall slowdown in
construction spending and the continued deferral of discretionary maintenance
and retrofit projects. In Eastern Europe, the Middle East and Latin America,
revenue declines ranged from 15% to 17% excluding the impact of foreign
exchange. Johnson Controls said it expects the Middle East and Latin America
markets to rebound in fiscal 2010. The quarter end backlog of uncompleted
contracts was $4.3 billion, down 9%. Johnson Controls said that in the 2009
quarter, the company was awarded its single largest order ever for HVAC
equipment -- an $87 million contract for chillers for a project in Saudi
Arabia.

The company said that it is bidding on approximately 3,300 projects, worth
approximately $2.7 billion, that are directly attributable to the ARRA
stimulus package. Johnson Controls said it continues to see delays of projects
where customers are waiting to determine funding eligibility under the
program. The company continues to believe, however, that 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 $138 million in the fourth
quarter of fiscal 2009 compared with $316 million in 2008. Earnings in the
current quarter were negatively impacted by the $105 million residential HVAC
warranty charge. Segment income declines in Europe and the rest-of-world
markets more than offset double-digit income improvements in North America
systems and Global Workplace Solutions.

Full-year results
For the 2009 fiscal year, Johnson Controls sales totaled $28.5 billion
compared to $38.1 billion for 2008. Financial results for the full 2009 fiscal
year are included in the Consolidated Statements of Income.

2010 Outlook
Johnson Controls today affirmed the 2010 financial guidance it issued on
October 13, 2009. 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."

Johnson Controls 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 130,000 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 www.johnsoncontrols.com.

Johnson Controls, Inc. ("the Company") has made forward-looking statements in
this presentation pertaining to its financial results for fiscal 2010 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 the
Company's Form 8-k (filed March 9, 2009) 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,
----------------------
2009 2008
---- ----
Actual Actual
------ ------

Net sales $7,867 $9,307
Cost of sales 6,724 7,883
----- -----
Gross profit 1,143 1,424

Selling, general and
administrative expenses (761) (850)
Restructuring costs - (495)
Debt conversion costs (111) -
Financing charges - net (72) (54)
Equity income 27 31
-- --

Income from continuing
operations before income
taxes and
minority interests 226 56

Provision (benefit) for
income taxes (77) 55
Minority interests in
net earnings (loss) of
subsidiaries 3 (15)
-- ---

Net income $300 $16
==== ===

Diluted earnings per
share $0.47 $0.03
===== =====

Diluted weighted average
shares 679 600
=== ===
Shares outstanding at
period end 671 594
=== ===

* Excludes restructuring and non-recurring tax items.

JOHNSON CONTROLS, INC.

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

Twelve Months
Ended September 30,
-------------------
2009 2008
---- ----
Actual Actual
------ ------

Net sales $28,497 $38,062
Cost of sales 24,948 32,536
------ ------
Gross profit 3,549 5,526

Selling, general and
administrative expenses (3,210) (3,565)
Restructuring costs (230) (495)
Debt conversion costs (111) -
Financing charges - net (239) (258)
Equity income (loss) (77) 116
--- ---

Income (loss) from
continuing operations
before income taxes
and minority interests (318) 1,324

Provision for income
taxes 32 321
Minority interests in
net earnings (loss) of
subsidiaries (12) 24
--- --

Net income (loss) $(338) $979
===== ====

Diluted earnings (loss)
per share $(0.57) $1.63
====== =====

Diluted weighted average
shares 595 601
=== ===
Shares outstanding at
period end 671 594
=== ===

* Excludes restructuring and non-recurring tax items.

JOHNSON CONTROLS, INC.

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

September 30, September 30,
2009 2008
---- ----
ASSETS
Cash and cash equivalents $761 $384
Accounts receivable - net 5,528 6,472
Inventories 1,521 2,099
Other current assets 1,883 1,721
----- -----
Current assets 9,693 10,676

Property, plant and equipment - net 3,986 4,389
Goodwill 6,544 6,513
Other intangible assets - net 746 769
Investments in partially-owned affiliates 718 863
Other noncurrent assets 2,296 1,777
----- -----
Total assets $23,983 $24,987
======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion of long-
term debt $798 $743

Accounts payable and accrued expenses 5,357 6,366
Other current liabilities 2,526 2,701
----- -----
Current liabilities 8,681 9,810

Long-term debt 3,168 3,201
Minority interests in equity of subsidiaries 201 236
Other noncurrent liabilities 2,812 2,316
Shareholders' equity 9,121 9,424
----- -----
Total liabilities and shareholders'
equity $23,983 $24,987
======= =======

JOHNSON CONTROLS, INC.

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

Three Months Ended
September 30,
---------------
2009 2008
---- ----
Operating Activities
Net income $300 $16

Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 184 202
Equity in earnings of partially-owned
affiliates, net of dividends received 24 (25)
Deferred income taxes (166) 33
Minority interests in net earnings (loss) of
subsidiaries 3 (15)
Non-cash impairment of long-lived assets - 43
Other - net 1 16
Changes in working capital, excluding acquisition
and divestiture of businesses:
Receivables (501) 21
Inventories 81 158
Restructuring reserves (61) 430
Accounts payable and accrued liabilities 704 (143)
Change in other assets and liabilities (11) 164
--- ---
Cash provided by operating activities 558 900
--- ---

Investing Activities
Capital expenditures (118) (256)
Sale of property, plant and equipment 20 10
Acquisition of businesses, net of cash acquired (6) (204)
Other - net (50) (44)
--- ---
Cash used in investing activities (154) (494)
---- ----

Financing Activities
Increase (decrease) in short and long-term debt -
net 1 (184)
Payment of cash dividends (78) (77)
Debt conversion costs (101) -
Other - net (8) (17)
-- ---
Cash used in financing activities (186) (278)
---- ----

---- ----
Increase in cash and cash equivalents $218 $128
==== ====

JOHNSON CONTROLS, INC.

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

Twelve
Months Ended
September 30,
-------------
2009 2008
---- ----
Operating Activities
Net income (loss) $(338) $979

Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation and amortization 745 783
Equity in earnings of partially-owned affiliates, net
of dividends received 79 (15)
Deferred income taxes 36 (40)
Minority interests in net earnings (loss) of
subsidiaries (12) 24
Non-cash impairment of long-lived assets 156 43
Non-cash impairment of equity investment 152 -
Other - net 90 96
Changes in working capital, excluding acquisition
and divestiture of businesses:
Receivables 796 281
Inventories 557 (49)
Restructuring reserves (83) 388
Accounts payable and accrued liabilities (962) (694)
Change in other assets and liabilities (299) 132
---- ---
Cash provided by operating activities 917 1,928
--- -----

Investing Activities
Capital expenditures (647) (807)
Sale of property, plant and equipment 28 52
Acquisition of businesses, net of cash acquired (38) (277)
Other - net (171) (238)
---- ----
Cash used in investing activities (828) (1,270)
---- ------

Financing Activities
Increase (decrease) in short and long-term debt - net 705 (522)
Payment of cash dividends (309) (297)
Debt conversion costs (101) -
Other - net (7) (129)
-- ----
Cash provided by (used) financing activities 288 (948)
--- ----

---- -----
Increase (decrease) in cash and cash equivalents $377 $(290)
==== =====

FOOTNOTES

1. Business Unit Summary

Three Months Ended Twelve Months Ended
September 30, September 30,
(in millions) (unaudited) (unaudited)
----------------- -------------------
2009 2008 % 2009 2008 %
---- ---- --- ---- ---- ---
Net Sales
---------
Building Efficiency $3,274 $3,901 -16% $12,493 $14,121 -12%
Automotive
Experience 3,484 4,064 -14% 12,016 18,091 -34%
Power Solutions 1,109 1,342 -17% 3,988 5,850 -32%
----- ----- ----- -----
Net Sales $7,867 $9,307 $28,497 $38,062
====== ====== ======= =======

Segment Income
--------------
Building Efficiency $138 $316 -56% $397 $957 -59%
Automotive
Experience 77 147 -48% (541) 579 -193%
Power Solutions 194 142 37% 406 541 -25%
--- --- --- ---
Segment Income $409 $605 $262 $2,077

Restructuring costs - (495) (230) (495)
Debt conversion
costs (111) - (111) -
Financing charges -
net (72) (54) (239) (258)
Income from
continuing
operations before
income taxes
and minority
interests $226 $56 $(318) $1,324
==== === ===== ======

Net Sales
---------
Products and
systems $6,169 $7,297 -15% $21,837 $30,568 -29%
Services 1,698 2,010 -16% 6,660 7,494 -11%
----- ----- ----- -----
$7,867 $9,307 $28,497 $38,062
====== ====== ======= =======

Cost of Sales
-------------
Products and
systems $5,375 $6,266 -14% $19,618 $26,492 -26%
Services 1,349 1,617 -17% 5,330 6,044 -12%
----- ----- ----- -----
$6,724 $7,883 $24,948 $32,536
====== ====== ======= =======

(1) Management evaluates the performance of the segments based primarily
on segment income, which represents income from continuing operations
before income taxes and minority interest, excluding net financing
charges and restructuring costs.

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.

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 Company
contributed cash and injection molding plants to the new entity with a fair
value of $262 million. The lenders contributed their rights to receive
Plastech's interiors business obtained in exchange for certain Plastech debt.

3. Restructuring Costs

As part of its continuing efforts to reduce costs and improve the efficiency
of its global operations, the company announced restructuring plans in the
second quarter of fiscal year 2009 and the fourth quarter of fiscal 2008 and
recorded $230 million and $495 million of restructuring charges, respectively.

The 2009 and 2008 restructuring charges relate 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 in 2010. The
automotive-related restructuring recorded in 2009 was in response to the
fundamentals of the European, North American and Japanese automotive markets
whereas the 2008 restructuring charge was in response to the fundamentals of
the European and North American 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 2008 restructuring actions 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 to reflect lower overall demand for original
equipment batteries resulting from lower production levels.

4. Income Taxes

As a result of certain events in various jurisdictions during the fourth
quarter of fiscal year 2009, the Company decreased their total reserve for
uncertain tax positions by $32 million. This is comprised of a $55 million
decrease to tax expense and a $23 million increase to goodwill.

As a result of various entities exiting business in certain jurisdictions and
certain recent events related to prior tax planning initiatives, during the
third quarter of fiscal year 2009 the Company reduced the unrecognized tax
benefits by $33 million. This is comprised of a $17 million decrease to tax
expense which impacts the effective tax rate and a $16 million decrease to
goodwill.

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, 2009, 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 accompanying Condensed Consolidated Statements
of Financial Position.

In the first quarter of fiscal year 2009, the Company recorded a $30 million
discrete period tax adjustment related to first quarter 2009 impairment costs
using a blended effective tax rate of 12.6%. Due to subsequent tax rate
changes during fiscal 2009, the discrete period tax adjustment decreased for
the year ended September 30, 2009 to $26 million.

In the second quarter of fiscal year 2009, the Company recorded a $27 million
discrete period tax adjustment related to second quarter 2009 restructuring
costs using a blended effective tax rate of 19.2%. Due to subsequent tax rate
changes during fiscal 2009, the discrete period tax adjustment decreased for
the year ended September 30, 2009 to $8 million.

In the fourth quarter of fiscal year 2009, the Company recorded a $15 million
discrete period tax adjustment related to debt conversion costs using an
effective tax rate of 36.5%.

In the fourth quarter of fiscal year 2008, the Company recorded a $43 million
discrete period tax benefit related to restructuring costs using a blended
effective tax rate of 12.4%.

The Company reviews its deferred tax asset valuation allowances on a quarterly
basis, or whenever events or changes in circumstances indicate that a review
is required. In determining the requirement for a valuation allowance, the
historical and projected financial results of the legal entity or consolidated
group recording the net deferred tax asset is considered, along with any other
positive or negative evidence. Since future financial results may differ from
previous estimates, periodic adjustments to the Company's valuation allowance
may be necessary.

In the first quarter of fiscal 2009, the Company performed an analysis of its
worldwide deferred tax assets. As a result of the rapid deterioration in the
economic environment, several jurisdictions incurred unexpected losses in the
first quarter that resulted in cumulative losses over the prior three years.
As a result, and after considering tax planning initiatives and other positive
and negative evidence, the Company determined that it was more likely than not
that the deferred tax assets would not be utilized in several jurisdictions
including France, Mexico, Spain and the United Kingdom. Therefore, the Company
recorded a $300 million valuation allowance as income tax expense. To the
extent the Company improves its underlying operating results in these
jurisdictions, these valuation allowances, or a portion thereof, could be
reversed in future periods.

In the second quarter of fiscal 2009, the Company performed an analysis of its
worldwide deferred tax assets. As a result, and after considering tax
planning initiatives and other positive and negative evidence, the Company
determined that it was more likely than not that the deferred tax asset
associated with a capital loss would be utilized. Therefore, the Company
released $45 million of valuation allowances against income tax expense in the
three month period ended March 31, 2009.

In the third quarter of fiscal 2009, the Company performed an analysis of its
worldwide deferred tax assets. As a result, and after considering tax
planning initiatives and other positive and negative evidence, the Company
determined that it was more likely than not that a portion of the deferred tax
assets in Brazil would be utilized. Therefore, the Company released $10
million of valuation allowances in the three month period ended June 30, 2009.
This is comprised of a $3 million decrease in income tax expense with the
remaining amount impacting the balance sheet.

In the fourth quarter of fiscal 2009, the Company recorded $84 million
discrete tax benefits related to a change in tax status of a US and UK
subsidiary. This is comprised of a $59 million tax benefit and $25 million
increase to goodwill. In the second quarter of fiscal 2009, the Company
recorded a $30 million discrete period tax benefit related to a change in tax
status of a French subsidiary. The change in tax status resulted from a
voluntary tax election that produced a deemed liquidation for U.S. federal
income tax purposes. The Company received a tax benefit in the U.S. for the
loss from the decrease in value from the original tax basis of its investment.
This election changed the tax status from corporations (i.e. taxable entity)
to a branch or partnership (i.e., flow through entity similar to a
partnership) for U.S. federal income tax purposes and is thereby reported as a
discrete period tax benefit in accordance with Accounting Standards
Codification 740.

In the second quarter of fiscal 2009, the Company filed a claim for refund in
the second quarter, with the Internal Revenue Service related to interest
computations of prior tax payments and refunds. The refund claim resulted in
a tax provision decrease of $6 million.

In calculating the provision for income taxes, the Company uses an estimate of
the annual effective tax rate based upon the facts and circumstances known at
each interim period. On a quarterly basis, the annual effective tax rate is
adjusted, as appropriate, based upon changed facts and circumstances, if any,
as compared to those forecasted at the beginning of the fiscal year and each
interim period thereafter. For the quarter and year ended September 30, 2009,
the Company decreased its estimated annual effective income tax rate from
continuing operations from 27% to 23%, primarily due to geographical shift in
income and global tax planning initiatives. This created a tax detriment of
$2 million in the current quarter after applying the new effective tax rate.
The estimated annual effective income tax rate from continuing operations for
the quarter and year ended September 30, 2008 was 21%.

5. Earnings per Share

The following table reconciles the numerators and denominators used to
calculate basic and diluted earning per share (in millions):

Three Months Twelve Months
Ended Ended
September 30, September 30,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (unaudited)
Income Available to Common Shareholders

Basic income (loss) available to common
shareholders $300 $16 $(338) $979

Financing costs related to the
convertible senior notes and
Equity Units, net of tax 18 - - -

Diluted income (loss) available to ---- ---- ---- ----
common shareholders $318 $16 $(338) $979
==== === ===== ====

Weighted Average Shares Outstanding
Basic weighted average shares
outstanding 599.6 593.2 595.3 593.1
Effect of dilutive securities:
Stock options 4.8 7.1 - 8.3
Convertible senior notes 31.3 - - -
Equity units 43.7 - - -
---- --- --- ---
Diluted weighted average shares
outstanding 679.4 600.3 595.3 601.4
===== ===== ===== =====

6. Convertible Debt and Equity Units Exchange

During the fourth quarter of fiscal year 2009, the Company announced and
settled the convertible senior notes and Equity Unit exchange offering. Upon
settlement of the exchange offers, approximately $805 million aggregate
principal amount of debt was exchanged for 75 million shares of common stock
and approximately $101 million in cash. As a result of the exchanges, the
Company recognized approximately $111 million of debt conversion costs within
its Condensed Consolidated Statements of Income which is comprised of $101
million of premium costs on the exchange and a $10 million charge related to
unamortized debt issuance costs.

SOURCE Johnson Controls

Investors, Glen L. Ponczak, +1-414-524-2375, or Media, Jacqueline F. Strayer,
+1-414-524-3876, both of Johnson Controls