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0000950137-07-015258.txt : 200710090000950137-07-015258.hdr.sgml : 2007100820071009164628ACCESSION NUMBER:0000950137-07-015258CONFORMED SUBMISSION TYPE:8-KPUBLIC DOCUMENT COUNT:123CONFORMED PERIOD OF REPORT:20071009ITEM INFORMATION:Results of Operations and Financial ConditionITEM INFORMATION:Financial Statements and ExhibitsFILED AS OF DATE:20071009DATE AS OF CHANGE:20071009
FILER:
COMPANY DATA:COMPANY CONFORMED NAME:JOHNSON CONTROLS INCCENTRAL INDEX KEY:0000053669STANDARD INDUSTRIAL CLASSIFICATION:PUBLIC BUILDING AND RELATED FURNITURE [2531]IRS NUMBER:390380010STATE OF INCORPORATION:WIFISCAL YEAR END:0930
FILING VALUES:FORM TYPE:8-KSEC ACT:1934 ActSEC FILE NUMBER:001-05097FILM NUMBER:071163076
BUSINESS ADDRESS:STREET 1:5757 N GREEN BAY AVENUESTREET 2:P O BOX 591CITY:MILWAUKEESTATE:WIZIP:53201BUSINESS PHONE:4145241200
MAIL ADDRESS:STREET 1:5757 N GREEN BAY AVENUESTREET 2:P O BOX 591CITY:MILWAUKEESTATE:WIZIP:53201
8-K1c19213e8vk.htmCURRENT REPORT
e8vk
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October9, 2007
JOHNSON CONTROLS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin
1-5097
39-0380010
(State or other jurisdiction
of incorporation)
5757 North Green Bay Avenue,
(Commission
File Number)
(I.R.S. Employer
Identification No.)
P.O. Box 591,
Milwaukee, Wisconsin
53201-0591
(Address of principal executiveoffices)
(Zip Code)
Registrants telephone number, including area code: 414-524-1200
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy thefiling obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))
o Pre-commencement communications pursuant to Rule13e-4(c) under the Exchange Act (17 CFR240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
Attached and incorporated herein by reference as Exhibit99.1 is a copy of the Johnson Controls,Inc. press release dated October9, 2007 reporting that the registrant affirms fiscal year 2007guidance and forecasts double-digit sales growth and double-digit earnings growth in fiscal year2008.
Attached and incorporated herein by reference as Exhibit99.2 is a copy of the Johnson Controls,Inc. Strategic Review and 2008 Outlook presentation for the analyst meeting held on October9,2007.
Item 9.01 Financial Statements and Exhibits
(d)Exhibits:
99.1 Press release of Johnson Controls, Inc., dated October9, 2007.
99.2 Strategic Review and 2008 Outlook presentation to analysts on October9, 2007.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly causedthis report to be signed on its behalf by the undersigned hereunto duly authorized.
JOHNSON CONTROLS, INC.
By: /s/ Susan M. Kreh
Name: Susan M. Kreh
Title: Vice President and
Corporate Controller
October 9, 2007
EXHIBIT INDEX
Exhibit No. Description
99.1
Press release of Johnson Controls, Inc., dated October9, 2007.
99.2
Strategic Review and 2008 Outlook presentation to analysts on October9, 2007.
EX-99.12c19213exv99w1.htmPRESS RELEASE, DATED OCTOBER 9, 2007
exv99w1
Exhibit99.1
CONTACT: Glen Ponczak investors
414-524-2375
Monica Levy media
414-708-0490
JOHNSON CONTROLS FORECASTS 18% EARNINGS GROWTH FOR 2008
MILWAUKEE, Wisconsin. . .Oct. 9, 2007. . . Johnson Controls, Inc. (JCI)today forecastdiluted earnings per share from continuing operations for fiscal 2008 to increase by 18% to $2.45 -$2.50.
Johnson Controls, a diversified industrial company that makes buildings and vehicles morecomfortable, safe and sustainable, also said that it expects sales for 2008 to increase by 10%, toapproximately $38billion.
Johnson Controls near-term sales growth will be driven by a combination of our participationin growing markets and our ability to increase our market shares, said Stephen A. Roell, chiefexecutive officer.
In the buildings market, he said, we will continue to achieve double-digit growth ratesbased on delivering energy efficiency and sustainability solutions globally. In the automotivemarket we are benefiting from our exposure to emerging markets and increasing demand for higherlevels of interior comfort, convenience and connectivity. Concurrently, we have significantexposure to the steady building services and aftermarket battery sectors where we are enjoyingstrong growth. We are also in a strong position to make investments that will broaden our productportfolios, technical capabilities and market penetration.
Mr.Roell added that Our forecast for margin improvement reflects the continuation of ourdisciplined process for achieving improvements in quality and cost. Those achievements,combined with our increased revenue growth, will make 2008 another year of strong profitablegrowth for Johnson Controls.
The company confirmed its guidance for 2007 fourth-quarter earnings of $0.77 $0.78 perdiluted share from continuing operations, an increase of 24 26% from the prior year. For thefull year, earnings are expected to be approximately $2.08-$2.10 per diluted share from continuingoperations (excluding a non-recurring tax benefit of $0.06 per share), up 19% over 2006. Sales for2007 are expected to total $34.5billion, up 7%. These record results will mark the companys61st consecutive year of sales growth and 17th consecutive year of earningsgrowth.
The company will report its financial results for fiscal 2007 on October23, 2007. Allearnings forecasts reflect the companys 3-for-1 stock split on October2, 2007.
###
Johnson Controls (NYSE: JCI News) is the global leader that brings ingenuity tothe 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 ourproducts and services for more than 200million vehicles, 12million homes and one millioncommercial buildings. Our commitment to sustainability drives our environmental stewardship, goodcorporate citizenship in our workplaces and communities, and the products and services we provideto customers. For additional information, please visit http://www.johnsoncontrols.com.
###
Johnson Controls, Inc. (the Company) has made forward-looking statements in this documentpertaining to its financial results for fiscal years 2007, 2008 and beyond that are based onpreliminary data and are subject to risks and uncertainties. All statements other than statementsof historical fact are statements that are or could be deemed forward-looking statements. For thosestatements, the Company cautions that numerous important factors, such as automotive vehicleproduction levels and schedules, energy prices, the ability to mitigate the impact of higher rawmaterial costs, the strength of the U.S. or other economies, currency exchange rates, cancellationof commercial contracts, changes to domestic and foreign tax rates, labor interruptions, theability to realize acquisition related integration benefits, as well as those factors discussed inthe Companys most recent Form 10-K filing (dated December5, 2006) could affect the Companysactual results and could cause its actual consolidated results to differ materially from thoseexpressed in any forward-looking statement made by, or on behalf of, the Company.
EX-99.23c19213exv99w2.htmSTRATEGIC REVIEW AND 2008 OUTLOOK PRESENTATION TO ANALYSTS ON OCTOBER 9, 2007
exv99w2
Exhibit 99.2
Johnson Controls, Inc. ("the Company") has made forward-looking statements in this documentpertaining to its financial results for fiscal years 2007, 2008 and beyond that are based on preliminarydata and are subject to risks and uncertainties. All statements other than statements of historicalfact are statements that are or could be deemed forward-looking statements. For those statements,the Company cautions that numerous important factors, such as automotive vehicle production levelsand schedules, energy prices, the ability to mitigate the impact of higher raw material costs, thestrength of the U.S. or other economies, currency exchange rates, cancellation of commercialcontracts, changes to domestic and foreign tax rates, labor interruptions, the ability to realizeacquisition related integration benefits, as well as those factors discussed in the Company's mostrecent Form 10-K filing (dated December 5, 2006) could affect the Company's actual results andcould cause its actual consolidated results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company.
CONTACT: Glen L. Ponczak
Director, financial communication
Johnson Controls, Inc.
414-524-2375
Forward-looking statement
Agenda 8:30 Opening commentsDenise ZutzVP Strategy, IR and Communication 8:40 TransformationJohn BarthChairman 8:55 Continuing our growthSteve RoellChief Executive Officer 9:25 Delivering sustainable growthKeith WandellPresident and Chief Operating Officer
9:55 Break 10:05 Automotive and Q/ABeda BolzeniusVP & President, Automotive Experience 10:40 Power and Q/AAlex MolinaroliVP & President, Power Solutions 11:00 Building and Q/ADave MyersVP & President, Building Efficiency 11:35 Financial reviewBruce McDonaldExecutive VP & CFO 11:55 Summary and Q/ASteve Roell
12:30 Lunch
Creating a more comfortable, safe and sustainable world
INGENUITY WELCOME
Transformation
October 2002
First meeting as CEO
Profitable growth
Diversify our businesses
Special focus on accelerating
growth in the controls business
Better leverage our resources
Diversity
Shareholder value
Transformation
Profitable growth
Consecutive years of record sales and earnings
2002
2007
Earnings
2002
2007
Sales
13%
CAGR
15%
CAGR
Transformation
More diversified, balanced portfolio
2007: Better able to withstandshort-term downturns in anyindustry or region
Sales and earningsdiversification
Power solutions
Expansion to Europe, Asia
Entered hybrid market
Building efficiency
Tripled available market -- morethan doubled business
Automotive experience
Significantly increasedgeographic presence andcustomer base
Automotive
Buildings
Power
Automotive
Buildings
Power
Sales
Earnings
Automotive
Buildings
Power
Automotive
Buildings
Power
2002
2007 (est.)
Transformation
Leveraging our scale, technology, talent
Management
Purchasing
Local market knowledge
Technology
Expertise in comfort, safety,sustainability
Leveraging the intersectionsbetween our businesses
Human machine interface
- -Transferring skills from auto interiors to
building controls
Hybrid battery systems
- -Leveraging automotive electronics
expertise
Distribution efficiency
- -Residential HVAC / batteries
Sustainability initiatives
Transformation
Benefiting from diversity
Sustainable businessadvantage due to minoritysupplier commitment
Billion Dollar Roundtable
$1.5 billion in diversepurchasing in 2007
Successful in cultures allaround the world
2002: 41 countries
2007: 75 countries
Local leadership
Transformation
Positioned for long-term global profitable growth
Diversification
Balanced portfolio
Leveraging our
resources
Diversity
Customer focused
Comfort
Leadership
Global
Safety
Sustainability
15 13 15 65 31 27
Consistent financial performance
Shareholder value
*as of 9/28/07
JCI
S&P 500
(stock price appreciation + re-invested dividends)*
MarketCapitalization
2002
2007
$7B
$23B
65%
31%
27%
16%
13%
15%
Total shareholder return
2007 Outlook*
Record sales and earnings
Consolidated net sales
Earnings per share
from continuing operations
Q4 2007 earnings will be released October 23, 2007
$34.5B + 7%
$2.08 - +19 - 20%
$2.10
*Estimated; EPS reflects 3-for-1 stock split on October 2, 2007
Continuing our success
Steve Roell
Chief Executive Officer
Keith Wandell President
and Chief Operating Officer
Stephen A. Roell
Chief Executive Officer
Thanks for your leadership
Looking to the future
A continued focus onprofitable growth
......by creating a more comfortable, safe andsustainable world
Sales Growth* > 10%
Earnings Growth* 10 - 15%
Growth objective
* Compounded annual growth rate
17th Consecutive Year of
Earnings Increases
61st Consecutive Year of
Sales Increases
Track record of success
CAGR15%
CAGR13%
Over the past decade we have achieved our goals
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07E
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07E
Johnson Controls growth
IndustryGrowth
Market ShareGains
Acquisitions
Johnson Controls growth
IndustryGrowth
Market ShareGains
Acquisitions
We participate in growing markets
5 year industry growth
Automotive +3%
Power +2%
Building +5%
Industry growth
Automotive Experience
65 million vehicles produced in 2007,growing to 76 million in 2012
Five-year average growth: 3% CAGR
Mature markets
North America 1.5%
Japan 0.6%
Western Europe 0.2%
Faster growth in emerging markets,especially China, India, SoutheastAsia, Eastern Europe, Russia
Richer mix and higher content pervehicle due to increasing penetrationof electronics
Global industry production volumes
2007
2012
65M 76M
Growth Markets
China
9.5%
India
18.3%
S.E. Asia
9.5%
E. Europe
6.1%
2007 2017 SA 22 29 Japan 25 25 Asia (ex Japan) 75 125 Europe 90 111 NA 110 115 ROW 15 15
2007
2017
337m
420m
Global industry unit volume
2% CAGR
Note: "Market" includes automotive, commercial, golf car,marine and utility batteries.(excludes motorcycles)
Industry growth
Power Solutions: lead-acid batteries
Limited car parc growth in maturemarkets
Longer battery lives
Quality improvement
Improved vehicle electrical structure
Strong new vehicle registrations inemerging markets
China
Largest automotive battery market in Asia
Highest annual growth rate in the world
at 8+%
Highly fragmented manufacturing base
Approximately 1,000 mfrs.
Expected to consolidate
Industry growth
Power Solutions: hybrid batteries
Demand growth driven by
Rising fuel costs
Emission reduction / legislation
Energy independence
Improved technology 2005 2010 2015 2020 North America 207 1172 2205 4500 Western Europe 18 200 920 1620 Japan 55 145 400 690 China 2 199 735 1570 Other 0 9 40 120
Projections continue to rise
Growth opportunities across all segments
Non-residential
HVAC services
$105 billion
Non-residential
HVAC systems
$35 billion
Residential
$35 billon
Global
Workplace
Solutions
$80 billion
4% annual growth
NA market ($11b)"normal" growth 6-8%
4-8% annual growth
Industry growth
Building Efficiency
8-12%
annual
growth
Global market size: $255 billion
Residential HVAC market growth
The ongoingreplacementcycle remains afavorablebackdrop forgrowth
Increased market demand for:
Advanced integrated technologies
to manage energy for a portfolio of buildingsincluding alternative energy sources
Advisory services
to develop energy management & sustainabilitystrategies for new and existing buildings
Technical services
that improve energy performance
in existing buildings
Solutions
that bundle systems and services to reduceenergy and operational costs
Building products
that use less energy and are commerciallyavailable today
Increasing energy prices
+ Energy independence
+ Green movement
+ Climate change concerns
+ Legislation, regulation &
incentives
Industry growth
Building efficiency
Growth in "green" demand
48% of survey participantsfeel environmentalresponsibility is at least asstrong a motivator as costreduction
Industry growth
Building efficiency 100% environmental responsibility Mostly for environmental responsibility Somewhat more for environment 50% cost savings/50% environmental Somewhat more for cost savings Mostly for cost savings 100% cost savings East 1 5 7 35 West 22 24 6
Motivation for energy efficiency investments
Energy efficiency indicator research, 1,250 respondents
Johnson Controls growth
IndustryGrowth
Market ShareGains
Acquisitions
We expect to continue growing at twicethe rate of our underlying industries
Improving comfort,safety, sustainability
Leveraging
competitive
advantages
Innovation
People
5 year industry growth
Automotive +3%
Power +2%
Building +5%
Growth driver: Creating amore comfortable, safe andsustainable world by creatingsmart environments
Effective
technology
Customer-
focused
Marketinsight &leadership
Creating Smart
Environments
Enable us to grow faster than ourunderlying businesses by:
Integrating technologies, products andservices
Redefining and enhancing therelationships between people and theirsurroundings
Anticipating changing needs anddeveloping practical solutions thatimprove workplaces, vehicles, homesand the global environment
Outperform our markets
Increasing comfort, safety and sustainability
"Cost Curve" for Carbon Abatement...
....the Most Effective Strategies
Outperforming our markets
Energy efficiency
2/3 of world's energy consumedin vehicles and buildings
Johnson Controls positioned toplay a critical role
Automotive experience
Customer relationships andengagement
Emerging market leadership;partnering
Global program executioncapabilities
Product offering / level of verticalintegration
Complete interior capability
Knowledge of consumerpreferences
Cost advantaged solutions
Financial strength
Outperforming our markets
Market share gain drivers
Power solutions
Product and process technologyleadership
Leading brands
Preferred supplier status
Operational excellence
Quality/cost leadership
Global presence
Financial strength
Outperforming our markets
Market share gain drivers
Building efficiency
Energy efficiencyknowledge/expertise
Branch network
Emerging market leadership
Targeted solutions offerings
Systems integration
Product technology
Outperforming our markets
Market share gain drivers
Outperforming our markets
Leveraging our competitive advantages: Innovation
Improving......
Sustainability
Lithium Ion
hybrid battery
Comfort
MicroChannelresidential airconditioning
Safety
Mobile DeviceGateway
Recruit and retain ingenious people worldwide
Outperforming our markets
Leveraging our competitive advantages: people
Recruit and retain ingenious people worldwide
Outperforming our markets
Leveraging our competitive advantages: people
Recruit and retain ingenious people worldwide
Outperforming our markets
Leveraging our competitive advantages: people
Johnson Controls growth
IndustryGrowth
Market ShareGains
Acquisitions
Financial strength to invest in thegrowth of all of our businesses
Improving comfort, safety,sustainability
Leveraging
competitive
advantages
Innovation
People
5 year industry growth
Automotive +3%
Power +2%
Building +5%
Johnson Controls growth
Acquisitions
Acquisitions are notconsidered growth, but rathera platform for growth
Strategic rationale
New technology/capabilities
New customers
New geographic markets
Maintain ROIC discipline
Areas of interest Buildingefficiency Powersolutions Automotive experience Mechanical serviceMid-marketGlobal residential marketsEnergy efficiency AsiaVertical integration Interior electronicsEmerging marketVertical integration
Long-term global growth
Sustained profitable growth oflarge companies is rare
Growth more influenced by thecontrollable than uncontrollable
Confident we can succeed
Participate in growing markets
Clear strategies to grow fasterthan underlying markets
Global positioning
Investments to sustain growth
Operational excellence
Ingenuity
Why growth stalls
20% of the root causes areuncontrollable
Economic turndowns, regulatory / anti-trust actions
80% are controllable
Breakdown of innovation management
Misread customer needs/competitorcapabilities
Premature abandonment of corebusiness
Strategic diffusion
Senior team strength / depth
Organization design
Talent shortage
Outperforming our markets
2008 outlook*
Consolidated net sales
Earnings per share
from continuing operations
$38B +10%
$2.45 - $2.50 +18%
*Estimated; EPS reflects 3-for-1 stock split on October 2, 2007
Strengthen customer relationships
Expansions in emerging markets
Broaden product scope and increase smartcontent
Win share through innovation, brand,quality, cost
Expand addressable markets
Build on sustainability leadership
Global leadership
Johnson Controls
Continued profitable growth
IndustryGrowth
MarketShare Gains
Acquisitions
Keith Wandell
Chief Operating Officer
Strategic focus
We have our vision
........growth through improving
comfort, safety and sustainability
We will make it happen
Delivering sustainable growth
Strategic "markers"
Integrity and ethics
Global growth
Global leadership and engagedemployees
Customer satisfaction
Continuous improvement
Innovation
Sustainability
Shareholder value
Delivering sustainable growth
Integrity
Fundamental definition:
Honesty
Fairness
Respect
Safety
We go beyond thefundamental:
Cultural respect
Strength in
relationships
Global inclusion
Ethics: more relevant
and important than ever
New geographies
More people
Greater cultural diversity
Delivering sustainable growth
Global leadership and engaged employees
Attracting, retaining and developing globalemployees and leaders to support our growthobjectives may be the biggest challenge we face
Our focus
Leadership development
Engagement
Diversity
Total employees 140,000 200,000 Leaders 10,000 14,000
2007
2010
2007-2010 growth
40% of sales fromemerging markets
80% of employeesoutside of the U.S.
2010
At the core of our success for many years
We're raising the bar on our customer relationships
Improved customer connection
Listening, learning, problem solving,anticipating needs
Knowledge and experience
Understand customer needs / influencers /decision makers, to best deliver ingenioussolutions of greatest value
Relationships
Place the customer first, build trust, embracethe long-term view
Delivering sustainable growth
Customer satisfaction
Proven way to create value, sustainablegrowth and increased margins
Key driver of customer satisfaction
Greater discipline leading to increased
number of commercialized products/services,
brought to market faster
Focus on innovation that improves comfort,
safety, sustainability in all our businesses
Delivering sustainable growth
Innovation
Delivering sustainable growth
Sustainability
Achieving competitive advantage
Regulatory compliance
NOVs, fines, permits
Chess Safety system,auditing
Work Council training
Ethics training
Sustainability Actions
Value
Cost reduction
Waste management
Energy management
Design for environment
Material lightweighting
Competitive advantage
100% recycled
Design for Sustainability
Sustainability Dashboard
Supply chain automotivesystems management
Sustainability reporting
Hybrid commercialization
Diverse global talent
Stakeholder collaboration
Community investment
NGO dialogue
Employee engagement
Customer SocialResponsibility Initiative
Fundamental to all we do; part of ourcorporate DNA
Be better than anyone else on quality andcost...and keep getting better
Footprint optimization: manufacturing,engineering, shared services
"Global" footprint increases focus onlogistics/transportation costs
Safety
Standardized global product and processarchitectures
Supply chain management and globalsourcing
Utilization of BBP
$2B+ identified cost reduction opportunity
Working capital focus
Delivering sustainable growth
Continuous improvement
We believe improvement isavailable in unlimited quantities
Best Business Practices process
Delivering sustainable growth
Shareholder value
Invest in sustainable growth in allthree businesses
We will capitalize on the benefits ofbeing a global growth company,maximizing shareholder value by:
Increasing return on invested capital
Increasing our business diversification
Leveraging company-wide talent,technology, processes and marketleadership
Disciplined capital planning strategy
Achieving our goals
Clear plan
Clear expectations
Clearaccountability
Aligned leadership
Continuous
improvement
Global growth
Global leadership and
engaged employees
Sustainability
Innovation
Customer
satisfaction
Shareholder value
Integrity
Automotive Experience
Beda Bolzenius
President
Automotive experience
Creating more comfortable, safe and sustainability vehicle interiors
Global provider of seating, overheadsystems, door and cockpit systems
Balanced business structure
Product portfolio, customer, geography
Increasing capability in electronics
Supplying over 30 million cars per year
250 locations in 30 countries worldwide
1/3 of all manufacturing in low-cost countries
North
America
42%
Europe
50%
Asia
8%
2007 sales (est.) $17.4 B
Seating
Interiors
Electronics
Competitive advantages
Strong track record for customersatisfaction
Global capabilities
Integrated low-cost country approach
Innovation to improve comfort, safetyand sustainability
Expertise to understand and deliveroptimal consumer value
Superior products from componentlevel through integrated systems
World-class craftsmanship and quality
Operational excellence
Financial strength
Diversified customer base
BB
Automotive experience*
Diversified customer base
North America
Europe
Asia
Asian
OEs**
68%
European& NA
32%
Customer exposureapproximately mirrorsNorth Americanmarket
Broad customer diversityacross European, Asianand North American OEs
Supplying all major OEsin China
New relationships withemerging "independent"Chinese OEs
European
53%
Asian** &NA
47%
NorthAmerican
54%
Asian** &European
46%
*2007 sales, including non-consolidated
**Over $8 billion in sales in Asia and to Asian OEMs
Global automotive market environment
North America
Cautious consumer behavior
Increased focus on fuel efficiency
Changing OE market shares
Distressed suppliers
Asia
Booming market
Significant growth for both OEMs andsuppliers
Main markets - China and India
Europe
Innovation
Speed
Model proliferation
Growth in Eastern Europe and Russia
Sustainability
Global market trends
Increasing importance ofinteriors to consumerbuying decision
Global platforms
Standardization ofseating/interiorcomponents
Quality
Shift to emerging markets
Smallest cars as newmarket segment
Focus on execution andoperational excellence
Strategies for profitable growth
Customer orientation / focus
World-class products and technologies
Components, systems, modules
Increased electronics capabilities
Systems integration
Customer-oriented innovation
Sustainability
Regional strategies
Emerging market expansion: integrated approach
Best practices across all aspects of the business
Product
Growth
Customer
Growth
Continuous
Improvement
Regional
Growth
PROFITABLEGROWTH
Strategies for profitable growth
Customer orientation / focus
Organizational alignment
Global customer business units
Customer-tailored business approach
Sourcing priorities
Components, modules, systems,
technology, price
Regional or global sourcing demands
Vehicle segment priorities
Customer-driven differentiated
innovation / co-innovation
Local market expertise
Aligning with the specific needs of each customer to best contribute to theirsuccess
Strategies for profitable growth
World-class products and technologies
Electronics
Strengthen capabilities & scale for current products
Driver interaction, connectivity, body electronics, specialty products
Build regional capabilities (Eastern Europe, Asia)
Expand customer base for existing products
"New" customers: BMW, Ford, Honda, VW
Expand product portfolio: center stack, HMI (driver assist)
Seating
Best-in-class components
Frames, mechanisms, etc.
Opportunity for adding value
Small car
Super low-cost seat
Interiors
Standard design
Systems integration
SlimSeat technology
increasing second row
leg room while maintaining
front row comfort
Innovative materials and processes
Recyclability
Strategies for profitable growth
Differentiated innovation
Leverage consumer research andmarket insight
Continuously fill the pipeline withdifferentiated solutions that willincrease consumer demand
Accelerate commercialization ofcustomer-driven innovation
Co-innovation with OEs, suppliersand other external parties
2007 Frankfurt auto show
more than 20 new products
I-3 concept vehicle
Frankfurt auto show innovations
Strategies for profitable growth
Differentiated innovation
riACT
Active
safety
headrest
2-color RIM
Multi-colorparts in a singleprocessing step
Voice-activatedinterface
Mobile DeviceGateway
BlueConnectHomeLink
PP thin film
Variable surface finishes
Scratch and mark-resistant
Dual-modecluster
Digital informationsuperimposed overanalog dials
Strategies for profitable growth
Innovation for sustainability
Products usingenvironmentally friendlymaterials
(e.g. Soy foam)
I N N O V A T I O N
Design for Recycling
(products and processes)
Environmental
design guidelines
(products and processes)
Avoidance of
hazardous materials
(e.g. Lead, mercury, cadmium
in electronics)
in Products and Processes
Lightweight products for
increased fuel efficiency
(e.g. Lightweight structures)
Strategies for profitable growth
Regional: North America
Sustainable turnaround
Focus on core competencies andareas of greatest value as definedby customers
Selective bidding
Selective takeover of businessfrom distressed suppliers
Increased focus on electronics
Low-cost country (Mexico)expansion
Pricing discipline
GMC Acadia
Johnson Controls supplies the seating, overhead, door,instrument cluster, cargo management, electronics andbattery for the popular GM "Lambda" vehicles, whichinclude the GMC Acadia, the Saturn Outlook and the BuickEnclave. A Chevrolet model will be introduced in 2008.
Industry flat
Big 3 lower
2008 NA production outlook (est.)
New electronics customers
Winning business
Seating: BMW, PSA, Fiat, VW
Interiors: Ford, PSA, Audi/VW
Geographic: Russian OEs
Focus on customer-driveninnovation (+60% increase inpatents in 2007)
Evaluate further low-cost
country initiatives
Strategies for profitable growth
Regional: Europe
CAGR 2007 - 2009 (est.)
Western Europe flat
Eastern Europe +8%
Eastern Europe is key to growth
Johnson Controls launched a new interiors program in 2007for the Volvo V70
Strengthen market share positions inChina
Solidify leading share in seating
Grow share in other interior zones,especially electronics, cockpit andoverhead
Localize R&D and componentmanufacturing to serve global markets
Build total interior systems integrationcapability
Johnson Controls China presence
$1.5 billion in 2007 sales (mostly unconsolidated)
19 joint ventures
Customers include all major OEs: BAIC, Chery,
China Brilliance, Dongfeng, FAW, Geely, SAIC, etc.
JE
Strategies for profitable growth
Regional: Asia
Johnson Controls will launch three newjoint ventures with Chery in 2008,providing interiors for five vehicle modelsin China.
CAGR 2007 - 2009 (est.)
China + 14%
Strategies for profitable growth
Operational excellence
Product &ProcessTechnology
Commodity
Management
SupplyChainManagement
ManufacturingOperations
OptimizedFootprint
LeverageFixed Assets
SG&A
Best BusinessPractices and SixSigma
JW
World-class cost & quality leadership
Low cost countries: integrated approach
Purchasing, manufacturing, engineering, partners
Manufacturing: 33% in 2007, 38% in 2010
Best business practices
$1.5 billion global savings opportunity
30% gap closure targeted annually
Engineering productivity
Purchasing excellence
Global commodity management, low-cost countrysourcing, e-procurement
Standardized products and processes
Incremental backlog of new business
$3.9 billion, up 11% fromlast year's level
2008-2010 net backlog* FY 2008 FY 2009 FY 2010 North America 0.3 0.5 0.225 Europe 0.2 0.45 0.675 Asia 0.4 0.55 0.6
$0.9B
$1.5B
$1.5B
- - Fiat
- - Peugeot
- - Russian OEMs
- - Chery
North America
Dodge Ram pick-up;
Journey CUV seats
Toyota CUV
Seats, overhead, door panels
Europe
Fiat 500 compact
Seats, door panels
Volvo XC50 CUV
Seats, overhead systems
Asia
VW Passat sedan
Seats
Chery A13 sedan
Seats, interiors
75% of backlog outside
of North America
Significant wins with
under-represented OEMs:
N. America
Europe
Asia
2008 - 2010 launches
*Based on vehicle platform volumeprojections; stable economic environment; netof discontinued programs; includes $1B ofunconsolidated sales
Automotive experience
Outpacing the market
Increased focus on customersatisfaction
Emerging market growth
Customer-driven innovation
Sustainability focus
Operational excellence
and continuous improvement
Power Solutions
Alex Molinaroli
President
Item 1 57.4 OE 22 Aftermarket 78
2007 sales (est.): $4.3 Billion
Original
Equipment
Aftermarket
Power Solutions
Largest global provider of lead acidbatteries
Leading independent provider of hybridautomotive battery systems
World-class customer base in stableaftermarket
Original Equipment (OE) batteries sold toevery major automaker in the world
Item 1 57.4 Americas 64 Asia 3 Europe 33
Asia
Americas
Europe
Johnson Controls produced 121 million leadacid batteries globally in 2007
Competitive advantages
Unmatched knowledge of automotive applications
100 years of under-the-hood experience, more than1.3 billion batteries produced
Unmatched quality and cost leadership
Solutions approach
Cells, systems, distribution, value-added services
Wide range of technologies: lead acid, absorbentglass mat (AGM), nickel metal hydride, lithium ion
Strongest portfolio of recognized brands
Amaron, Bosch, Champion, Delkor, Energizer, Heliar,LTH, Optima, Varta
Only truly global footprint
Close, long-term customer relationships
Sustainability: lead acid battery recycling andhybrid expertise
Strategies for profitable growth
Lead acid market growth
Targeted specific market segments in maturemarkets
Geographic expansion: focus on Eastern Europe,Russia, and China
Value added services: consumer research,category management
Technology leadership: longer life, improvedquality
Operational excellence: manufacturing processquality and cost focus
Sustainability: closed-loop recycling
Hybrid systems
Co-development with global OEs
Technology leadership: full system and multiplechemistry capabilities
Automotive application experience
Manufacturing process expertise for reliability and cost reduction
Strategies for profitable growth
Lead acid: Americas
U.S. / Canada
Wholesale channel opportunity
Focus on products, distribution, and cost
Leverage 'Interstate Battery' distribution,branding, service and consignment capabilities
Maintain share at key national retailers
(examples: Advance Auto, Les Schwab, AutoZone,Blain's Farm & Fleet, Costco, Kmart, Pep Boys, Sam'sClub, Sears, Wal*Mart)
Value-added services
Quality focus
National-brand access and support
Supplying desired niche products (Optima)
Mexico/South America
Leverage strong LTH and Heliar brands
Improve wholesale distribution coverage
in South America
Increase motorcycle battery production
Johnson Controls market share: 51%
Leverage Varta and Bosch brand strength
Leverage OEM program success andtechnology leadership into aftermarket
Focus on the wholesale segment
Optimize distribution by country
Product redesign: reduce complexity
Brand repositioning
Technology differentiation: Powerframe(tm)implementation
Enter Eastern Europe, Turkey
and Russia
Annual auto build expected to grow
to >8M units by 2017
Strategies for profitable growth
Lead acid: Europe
Johnson Controls market share: 35%
Strategies for profitable growth
Asia
Focus on China
Market growing 8% annually
1,000 manufacturers today
Strategic partnership with #1 automotivebattery manufacturer and brand in China(Baoding Fengfan Co., Ltd.)
Further develop Varta and BOSCH brands
Global and OE technology leader, "Western"technology made in Asia
Increase product differentiation
Powerframe(tm) implementation
Maintenance free and high heat design
Introduce Optima
Enter adjacent lead-acid batteryapplications
Shanghai, China battery store
Johnson Controls market share: 19%
Strategies for profitable growth
Absorptive Glass Mat (AGM) technology
AGM technology advantages
- - Deep cycle, increased powerdensity, vibration resistance,zero leakage
Leverage Optima U.S. brand loyalty (90%+)
Retail price range $155 to $250
Expand Optima distribution in Europe,
Asia, Latin America
Target specialty markets - highperformance marine and heavy duty
Further develop flat-plate AGM (vlies.tec)capabilities for OE and aftermarket
Johnson Controls AGM utilized for
start/stop hybrid applications today
Vlies.tec flat plate AGM
Optima(r) spiral-wound AGM
Strategies for profitable growth
Operational excellence
Provide highest quality while driving lower cost through world-class leadership in productand process technology, quality, service, footprint, and increased vertical integration
Product
EngineeringOptimizedMaterialreduction
Supply ChainManagement
ProcessEngineering
Productivity &standardization
Manufacturing& DistributionOperations
OptimizedFootprint
Acquisition
Integration
SG&A
Best BusinessPractices and SixSigma
Cost Savings
$225M
30% quality and cost improvement
targeted annually
U.S. average automotive battery life (2001-2006)
End-of-life battery return analysis
Battery average life
JohnsonControls
Competitor
One
Competitor
Two
10 months
13 months
Strategies for profitable growth
Lead economics
Lead is more than 72% of a lead acidbattery cost ... and increasing
LME lead is at all-time high
in real dollars
Global lead supply is lagging demand
China demand growing
Increased hedge fund and mutual fundparticipation
Critical success factors
Manage pricing to mirror lead volatility
Collection of spent cores
Secure incremental smelting capacity
Global LME financial hedging
Time Monthly Real 1/1/2000 472 Feb 452 Mar 441 Apr 421 May 412 Jun 420 Jul 452 Aug 473 Sep 487 Oct 486 Nov 468 Dec 462 1/1/2007 478 Feb 502 Mar 498 Apr 477 May 469 Jun 445 Jul 462 Aug 483 Sep 465 Oct 468 Nov 487 Dec 483 1/2/2007 513 Feb 480 Mar 480 Apr 472 May 452 Jun 440 Jul 446 Aug 423 Sep 421 Oct 418 Nov 442 Dec 444 1/3/2007 445 Feb 476 Mar 457 Apr 437 May 464 Jun 468 Jul 515 Aug 497 Sep 521 Oct 587 Nov 622 Dec 692 1/4/2007 758 Feb 888 Mar 886 Apr 754 May 809 Jun 870 Jul 940 Aug 922 Sep 935 Oct 933 Nov 968 Dec 975 1/5/2007 953 Feb 978 Mar 1006 Apr 986 May 988 Jun 986 Jul 855 Aug 887 Sep 933 Oct 1005 Nov 1018 Dec 1123 1/6/2007 1256 Feb 1277 Mar 1192 Apr 1170 May 1167 Jun 964 Jul 1052 Aug 1117 Sep 1339 Oct 1531 Nov 1625 Dec 1726 1/7/2007 1666 Feb 1780 Mar 1914 Apr 2001 May 2101 Jun 2426 Jul 3084 Aug 3119 Sept 3112 Oct 3670
Lead LME Real Dollars: Monthly Average
Jan 2000 - Sep 2007
In USD
Strategies for profitable growth
Environmental sustainability
Closed loop recycling provides bothcustomers and Johnson Controlswith significant benefits
Added-value disposal service to ourcustomers
Linkage of pricing between new unitand spent cores
Environmental stewardship
Johnson Controls strategies
Develop proven closed loop recyclingprocess for emerging markets
Promote recycling changes in EasternEurope and Asia
Ensure sufficient regional tollingcapacity
In 2007, Johnson Controls hosted Chinese governmentofficials on an educational tour of battery smelting andrecycling centers in Europe and North America
Strategies for profitable growth
Hybrid battery systems
Industry winners must have
Multiple cell chemistries for varying applications
Battery system integration and vehicle systemintegration electronics
High volume manufacturing expertise
OE confidence
Aftermarket support network
Hybrid battery systems leader -apply and integrate superiortechnologies
Innovation and functionality
Safety first
Quality and cost focus
Architecture flexibility and reusability
Manufacturing process capability
Ability to recycle
Take advantage of our automotivecustomer relationships globally
Johnson Controls lithium ion battery system
Johnson Controls battery systems will beapplied in over 750,000 hybrid productionvehicles in 2008
AGM
Nickel metal hydride
Lithium ion
Hybrid progress
Executing Li-Ion (HEV) production programs
for Mercedes S-Class, E-Class and C-Class
.....additional yet-to-be announced European OEproduction contract underway
2008 and 2009 production
Plug-in hybrid (PHEV) Li-Ion development
contracts
12 active contracts
Saturn Vue Green Line (plug-in)
DCX Sprinter van
Chinese market
Production contract for initial HEV system forChery (2008 launch)
Partnership agreement in place to develop andproduce all HEV applications for additional OE
Manufacturing and regional engineering investments
European lithium-ion production and Asian assemblyplant - 2007/08
Shanghai engineering and technical center
Extending Milwaukee test facility capabilities
The Mercedes S-Class will be offered as ahybrid using Johnson Controls lithium-ionbatteries starting in 2008. It will be the firstproduction hybrid to use lithium-ion.
Power solutions summary
Continue global lead acid market sharegrowth in all regions
Aggressively expand in emerging andadjacent markets
Continued quality and cost leadership
Further lead management capabilities
Supporting multiple chemistries forhybrid applications
Developing world-class lithiumtechnology and manufacturing
Building Efficiency
Dave Myers
President
Building efficiency
Delivering improved energy efficiency, comfort and safety
Non-residential buildings
Diverse customers; huge globalinstalled base
Systems, products, services andsolutions offerings
Low cyclicality due to largeservice/renovation volume
Benefits from high energy costenvironment
Residential and light commercial
Air conditioning and heating,
65% replacement
Retrofit
75%
New
Construction
Europe
29%
North
America
54%
Asia
17%
Non-
residential
91%
Residential
Services
Systems
2007 Sales: $12.7 Billion (est.)
Competitive advantages
Leadership in energy management capability
Demand and supply side energy solutions
Systems, products
Solutions / performance contracting
Project management
Technology and capabilities
HVAC depth: unmatched equipment
and controls offering
Market-leading integration capabilities
Predictive maintenance
Local branch network
Installed base of customers
unmatched in the industry
Branch and site managers with personal
relationships
500+ building efficiency locations
125 countries
1 million-plus customers
Competitive advantages
Service depth
13,000 HVAC technicians and front-liners
12,000 global workplace solutions service
delivery personnel
Wide range of capabilities to service
customer needs
Strong brand
Reliable products and services
Deliver proven solutions
Financial strength
Manufacturing footprint
30+ global manufacturing plants on four continents
with substantial presence in low-cost countries
Best practices shared globally
Building efficiency
Industry environment
Rising demand for energy, resulting inincreased prices and volatility
Increased energy efficiency legislativerequirements worldwide
Increasing non-residential newconstruction levels globally
Favorable HVAC equipmentreplacement cycle
Fragmented technical services market
Greater customer demand for
one-stop-shop solutions
North America residential: near-termlower demand in both new constructionand replacement markets
Strategies for profitable growth
Grow the systems business globally
Complex buildings: cross/joint sell, product bundling
Mid market
Expand global service leadership
Technical services
Solutions
Global Workplace Solutions
Focus on growth markets
Energy efficiency
Emerging markets
Grow residential market share
Operational excellence
FY07 equipment cross-sell wins
Strategies for profitable growth
Grow the systems business globally: complex buildings
Participationacross theglobe
Middle
East
4%
Asia
9%
Latin
America
9%
Europe
16%
North
America
62%
Cross-sell equipment and controls
Opportunity continues for years to come
2007 cross-sell wins: $500 million
Broaden product offering
Create optimal HVAC system (chillers, airhandlers, controls, fans, pumps, etc.)
Increased controls integration capability
Expand technology leadership
Metasys system
Connectivity: PDA, internet
Energy tracking, central plant capabilities
Wireless systems: Integrate with broaderrange of building systems at lower cost
Next generation high efficiency HVACcompressor/drivelines: variable frequencydrives, frictionless bearings
Embedded controls to improve total systeminstalled cost
Budapest, Hungary
Palace Hotel
Metasys, security,fire systems, chillers,fan coil units, airhandling units
Product development and acquisitionsto meet customer requirements
Heat pumps, VAV & fan coils, coolingtowers, energy recovery units, fans, low-tier rooftop units
Gaining share, increasing capabilities
Cost competitive rooftop
Self-installed control systems
Enhance distribution through thirdparty distributors to complementbranch structure
Develop easy-to-use design / salestools
Simplify process for our customers
Improve productivity of our sales team
Strategies for profitable growth
Grow the systems business globally: mid-market
Mid-market buying decisions
Total installed cost
Responsiveness and relationship
Availability, speed and ease of
transaction
Variable air volume (VAV) box with
embedded controls
One equipment piece
One Site
Entire Portfolio
Strategies for profitable growth
Expand global service leadership
Strategies for profitable growth
Expand global service leadership
Technical services
Use scale to drive growth
10,000 front-liners; double the size of #2competitor
Cross-sell HVAC and controls service
Global workplace solutions
Expand global Fortune 1000 channel
Expand penetration of high-valueofferings
Solutions: expanded scope & highvalue offerings
Energy, green buildings, sustainability,renewable energy solutions coupledwith performance contracting
New York
Philadelphia
Houston
Los Angeles
Chicago
Toronto
London
Paris
Madrid
Berlin
Rome
Warsaw
Istanbul
Beijing
Shanghai
Hong Kong
Manilla
Hanoi
Bangkok
Jakarta
Delhi
Mumbay
Karachi
Dhaka
Sydney
Melbourne
Cairo
Johannesburg
Lagos
Nairobi
Addis Abeba
Mexico City
Buenos Aires
Sao Paulo
Caracas
Lima
Bogota
Rio de Janeiro
Santiago
Moscow
San Francisco
Seattle
Portland
Austin
Salt Lake City
Curitiba
Rotterdam
Stockholm
Copenhagen
Heidelberg
Johnson Controls selected in 2007 toparticipate in the Clinton Climate Initiative
- Goal: generate energy savings and
greenhouse gas reductions through
performance contracting in 40 cities
globally
-Up to $5 billion in available project funding
Clinton Climate Initiative Cities
Energy DemandManagement
How can I be sure thatI am running myfacilities in the mostenergy efficient mannerpossible?
How do I buildemployee awarenessaround energy usage?
What is the best way tofinance new assets?
Products
Supply Side
Advisory
Utility Bill Management
Energy Analytics &Optimization
Regulatory Compliance& Sustainability
Strategic Energy Planning - How do I put together an overall strategic plan for energy usage in my facilities?
How can I ensure thatmy utility bills are correctand paid on time?
How can I recoverincorrect energy billcharges and eliminatelate fees?
How can I benchmark myenergy costs against mycompetitors?
How do I monitorand optimize energyusage in my facilities?
How do I trackcompliance withregulatoryrequirements?
How do I design mybuildings to meetenergy-relatedcertifications?
Program Management - How do I manage all the aspects of my energy program?
What is the best price Ican get for energy?
How can I make sure Iget the most favorablecontracts with utilitycompanies?
Do renewabletechnologies makesense for my business?
Which products will bebest for my facilityneeds?
Can I use alternativeenergy sources?
Strategies for profitable growth
High value solutions offerings
Energy and environment/sustainability solutions
Customer: "Why should we do this" replaced by "How can we get it done"
Customers often ill-equipped to manage growing complexities
Multiple specialists, highly fragmented
Rapid changes in technology, regulations, NGO/stakeholder expectations
Johnson Controls is uniquely positioned to serve growing global customer demand
Increase penetration of emerginggeographic markets: China,Middle East, Latin America
Growth rates at least 2x maturemarkets
Filling gaps in existing offerings
Building distribution / channel
Strategies for profitable growth
Focus on growth markets
Sheraton Xiamen Hotel
Guangzhou International
Convention Center
Skyplaza South office,
Hong Kong Airport
100,000 customers in China
Recent cross-sell equipment projects
Strategies for profitable growth
Grow residential HVAC market share
Expand residential distribution network
Residential systems sold primarily
through local third-party HVAC contractors
Increasing distribution density and taking share
Dealers want to travel less than 30 minutes todistributor to pick up product
Increase competitive advantage throughtechnology
Microchannel: 30% smaller than standard unit
US Airconditioning distribution
High efficiency furnaces
Investigate global market opportunities
$24 billion market, 7% annual growth
Mini-split technology vs. ducted systems
2007 distribution gainsSuccessfully converted majordistributors in the Northeast,Indiana, and California to carryYork residential HVAC systems
Strategies for profitable growth
Operational excellence
Manufacturing employees
2006 2008
Low-cost countries 38% 54%
Combining and leveraging platforms
Air cooled chillers: 15 to 9 platforms
Water cooled chillers: 8 to 6 platforms
Heat pump products: 10 to 7 platforms
Redesigning equipment to reduce cost,weight and size
Embedded controls to improve totalsystem installed cost
Purchasing and supply chain initiatives
Manufacturing footprint optimization /low-cost country shift
Product
EngineeringOptimizedMaterialreduction
Supply ChainManagement
ProcessEngineering
Productivity &standardization
Manufacturing& DistributionOperations
OptimizedFootprint
Acquisition
Integration
SG&A
Best BusinessPractices and SixSigma
Cost Savings
$500 Million
Building efficiency summary
Significant competitive advantages
Solutions for every type of business,opportunities available at any point in buildinglifecycle
Leading positions in several key global markets
Opportunity to create leadership position in manyothers
Positioned to grow at twice the rate of ourunderlying markets
Margin improvement through improved mix andoperational improvements
Financial
93
Bruce McDonald
CFO
Fiscal 2007 outlook
October 2006guidance Outlook vs. guidance Consolidated net sales Approx $34B(up 6%) Exceeded EPS from continuing operations(post 3-for-1 split) Approx $2.00(Up 14%) Exceeded Capital expenditures 1.2:1 reinvestment ratio Improved Total debt-to-capitalization(at Sept. 30) Approx 30% Affirmed
Fourth quarter: reaffirming EPS of $0.77 - $0.78 (Up 24 - 26%)
Diverse business model
Diverse customer base
Building Efficiency
One million customers in 125countries
Power Solutions
Thousands across all regions
Automotive Experience
Global customer base
Two-thirds of sales to European andAsian OEMs
10% of total consolidated sales to"Detroit 3" in North America
Building21% $1.25 EUR Series 1 Interior 0.45000000013148 Power 0.16 Building 0.39
AutomotiveExperience
45%
BuildingEfficiency39%
PowerSolutions16% $1.25 EUR Series 1 North America 0.49 Europe 0.4 ROW 0.11
N. A.48%
ROW12%
Europe40%
Business
Region EBIT @ $1.25 EUR Series 1 IE 0.29 PS 0.23 BE 0.48
AutomotiveExperience
BuildingEfficiency
PowerSolutions
2008e sales
2008e earnings
A diversified growth company
A diversified growth company
Financial strength
Long-standing "A" credit rating
Dividends paid since 1887; dividendincreased for 32 consecutive years
Financial strength to reinvest in thebusiness:
New technology / capital expenditures
Acquisitions / joint ventures
2008 margin expansion
Building efficiency growth
Automotive turnaround in North America
Cost focus: Significant additionalopportunities through BBP / Six Sigma /Lean
FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E Data 10.4 11.7 15.3 16.2 17.4 18.8 21.2 24.6 27.5 32.2 34.4
FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07E Data 304 343 438 525 535 584 645 729 857 1032 1258
13%
CAGR
2007: 17th consecutive increase
2007: 61st consecutive increase
Consistent financial performance
15%
CAGR
A diversified growth company
Earnings visibility...and stability
Automotive Experience
$3.9 billion three-year backlog of netnew incremental business
Power Solutions
Recurring aftermarket volumecomprises 78% of sales
Building Efficiency
55% recurring revenue
$4.2 billion backlog at September 30
Effective income tax rate
Effective income tax rate
Financial targets
Target 2008 Outlook Sales growth > 10% 10% Earnings growth 10 - 15 % 18% ROIC increasing to 15 - 16% 150 bpincrease Debt/capitalization 35 - 40% Acquisition dependent
Fiscal 2008 key assumptions Automotive production North America 14.8 - 15.0M (flat) Europe 21.0M (+2%) Construction spending Non-residentialDomesticInternational+1%+7% U.S. Residential -4% Commodities outlook Steel Lead: 25-year high $3,000 per metric ton Volatility continues Foam chemicals Lead: 25-year high $3,000 per metric ton Volatility continues Resin Lead: 25-year high $3,000 per metric ton Volatility continues Copper Lead: 25-year high $3,000 per metric ton Volatility continues Other assumptions Tax rate 21% - level with underlying 2007 rate Euro exchange rate $1.35
Stable
Fiscal 2008 outlook Consolidated net salesApprox. $38B (up 10%) Growing faster than underlying marketsFocus on growth in emerging marketsLead inflation in Power Solutions EPSApprox. $2.45 - $2.50 (up 18%)Double-digit earnings growth for the 6th consecutive year Segment income marginHigher Underlying margin improvement in all businesses Net financing chargesApprox. $30 million lower Seasonality of cash flow Capital expenditures1:1 reinvestment ratio Capital spending declines from 2007Power Solutions spending normalizesInvestments in emerging markets Total debt-to-capitalizationAcquisition dependent Free cash flow generation of $1.1 - $1.3 billionIncrease payout ratioCapacity for strategic acquisitions
Automotive Experience
Financial outlook
2008 projections
Sales approximately level with 2007
Growth in emerging markets largely via unconsolidated jointventures (China +30%)
Higher backlog
Unfavorable mix
Segment income margin increase to 3.4 - 3.8%
North American profitability: Approximately 3x 2007 level
Strong European performance continues
Asian results stronger despite ongoing investments
Asian results stronger despite ongoing investmentsAsian results stronger despite ongoing investmentsAsian results stronger despite ongoing investmentsAsian results stronger despite ongoing investmentsAsian results stronger despite ongoing investmentsAsian results stronger despite ongoing investmentsAsian results stronger despite ongoing investmentsAsian results stronger despite ongoing investmentsAsian results stronger despite ongoing investmentsAsian results stronger despite ongoing investmentsAsian results stronger despite ongoing investments
Mid-term margin potential: 5%
North America: 100 bp per year improvement
Europe: Modest improvement through 2009; 2010+ revenue growth resumes
Asia: Profitability improvement partially offset by growth investments
Power Solutions
Financial outlook
Lead Impact
Rapid escalation of lead pricesincreases both sales and cost levels
Even though profitability is maintainedvia lead cost pass-throughs, significantreduction of margin as a percentage ofsales
Lead hedging program protectsearnings as price adjustmentmechanisms lag LME
FY 2007
Pro Forma Impact
$3,000/MT
LME 2007 actual @ $1,900/MT 2007 pro forma @ $3,000/MT 2008 estimate @ $3,000/MT Revenue $4.3B $5.5B Approx. $6.0B Segment margin 12.0% 9.4% 9.0 - 9.5%
Power Solutions
Financial outlook
2008 projections
Sales up approximately 40%
10% increase excluding lead
Strong worldwide volume growth
New contract wins
Growing customers
Benefit of global capacity expansion
Segment income margin 9.0 - 9.5%, level
excluding lead impact
Lead: pricing, recycling, hedging strategies
Best-in-class operational execution
Growing investment in hybrid technology
Mid-term margin potential:
Continued increase (cumulative 100 - 150 bp) driven by benefit of manufacturinginvestments and improved product mix
Building Efficiency
Financial outlook
2008 projections
Sales up approximately 15%
Strong backlog; revenue synergies
Non-residential domestic market solid; limited exposure toretail/lodging/manufacturing sectors
Well positioned in faster growing non-residential emerging markets
Growth in residential despite U.S. market downturn: distributionexpansion
Segment income margin increase to 7.3 - 7.5%
Dilutive impact of GWS 130 bp
Benefits of global volume growth, scale
Deployment of best practices, manufacturing footprintrationalization, supply chain management
Mid-term margin potential: 10% (excluding GWS)
Steadily increasing margins
Benefit of economies of scale
Infrastructure/emerging market investments
Cash flow priorities
Cash flow deployment
Reinvest in the businesses
Increase payout ratio
Acquisitions / joint ventures thatprovide access to new:
Markets
Customers
Technology
....and meet our ROIC requirements
150 bp increase in ROIC in 2008
+100 bp
+150 bp
State of the company
Profitable growth continues
Power - Recurring revenue, profitable growth
Automotive - Sustained recovery
Favorable economic environment:
Strong backlog; revenue synergies continue
Cost structure optimization: manufacturing,purchasing, branch network, scale
Energy
Economic cycle mixed ... net positive
Emerging market exposure
Gaining market share - European/Asianemphasis
Benefiting from investments in capacity
NA turnaround - further cost reductions
European profitability continues tostrengthen
Building - High rate of growth continues
18% earnings growth ... strong start to year (Q1 earnings up 25 - 30%)
Successful de-leveraging provides financial strength to invest in all three businesses
Significant emerging market growth
Double-digit increase in backlog
Significant hybrid contract wins
Making the necessary investments to sustain top-line growth
Stephen A. Roell
Chief Executive Officer
Johnson Controls
Sustainable, profitable growth
Our culture is a key competitive advantage
Results focused
Customer focused
Competitive
Positioned to outperform
our underlying industries
Expand in emerging markets
Win share through innovation,
quality, cost
Broaden product scope
Expand addressable markets
Leverage customer intimacy
Strong cash flows to fund acquisitions that supportthese growth strategies
Diverse portfolio withstandsshort-term market disruptions
Strong leadership
Clear path to achieving our goals
Integrity and ethics
Global growth
Global leadership
and engaged employees
Customer satisfaction
Continuous improvement
Innovation
Sustainability
Shareholder value
Johnson Controls
Sustainable, profitable growth
INGENUITY WELCOME
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