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Barclays Industrial Goods ConferenceBarclays Industrial Goods Conference
February 2008
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Forward-looking statement
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-k filing (filed November 25, 2008) could affect the Company's actual results and could cause its actual consolidated results to differ materially from those expressed in
f d l ki t t t d b b h lf f th Cany forward- looking statement made by, or on behalf of, the Company.
Contact: Glen L. PonczakDirector, Investor Relations414-524-2375Glen.L.Ponczak@jci.com
Contact: Glen L. PonczakDirector, Investor Relations414-524-2375Glen.L.Ponczak@jci.com
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K ith W d llKeith WandellPresident and Chief Operating Officer
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Johnson ControlsJohnson Controls
Three world-class businesses
Building efficiency
Creating quality indoor environments that are
Power solutionsProviding the highest quality, lowest cost
Interior experience
Delivering world-class technologies thatenvironments that are
energy efficient, comfortable and safe
automotive batteries to help customers grow their market shares and to power the vehicles of
technologies that differentiate vehicle interiors and increase consumer demand
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tomorrow
Johnson Controls Inc.2008 financial results
Sales$
Earnings$
Power
$38.1 B $1.4 B
Buildings37%
o e15%
Buildings46%
Power26%
Automotive48% Automotive
28%
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Automotive Experience
Leading global provider: systems and components for seats, overheads, d k it d l t i
2008 sales
$18 1 Billiondoors, cockpits and electronics
– Supplying over 30 million cars per year from 250 locations in 30 countries (1/3 in low cost countries)
Europel
North
$18.1 Billion
low-cost countries)
– Over 60% of revenues generated outside of North America
Asia9%
54% Detroit 348%
TransplantsAmerica37%
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*Excludes $1.5B unconsolidated revenue in China
2009: Automotive Experience strengths
Record backlog of new seating and interior programs
$4 5 billion to launch between
Backlog of new business*
– $4.5 billion to launch between 2009 and 2011
– 85% outside North America
– Reflects increasing market share in Europe, Asia
– Primarily cars, CUVs
Winning new business, increasing market share
Expanding leading market position inExpanding leading market position in China and Eastern Europe
Strong partner in a weakening supply base *Announced 10/08. Net of discontinued programs, includes
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supply base Announced 10/08. Net of discontinued programs, includes unconsolidated sales, assumes stable production levels.
Historic changes in our marketsNorth American auto production
2009 estimated production forecast of 9.2million vehicles; lowest level since 1983Down 34% in one year vs. 13.2 million vehicles in 200847% decline from the 2001 peak of 17.7 million units
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Historic changes in our marketsEuropean automotive production
Rapid deterioration; European markets were stable through August 2008 European automotive production
Western Europe car registrations down 26% vs. last year
– December: Worst quarter since 19931015
2025
Eastern Europe registrations down 23% in December quarter
Production still heading lower05
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2005 2006 2007 2008 2009 (e)
5.65.8
5.6
5.15.25.45.65.86.06.2
ion
units
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3.84.04.24.44.64.85.05.2
Q1 Q2 Q3 Q4 Q1
In m
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Q Q Q Q QFY 2008 FY 2009
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Power Solutions
Largest global provider of automotive batteries
Lead acid batteriesLead acid batteries– #1 global market share of 36%
• Americas (50%)
• Europe (35%)
– Largest provider to the automotive aftermarket
– Original equipment (OE) batteries for the top automakers worldwide
– New entrants into Asia
• “China First” strategy
Lithium-ion batteries for hybrid vehicle applications
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vehicle applications
2009: Power Solutions strengths
Winning new OE and aftermarket customers globally
Lowest cost, highest quality provider
– World-class manufacturing processes and technologies (PowerFrame)g ( )
– Best Business Practices
Aftermarket (76% of sales) less economicallysensiti esensitive
Growing demand for AGM demand for micro-hybrid vehicles
Financial strength vs. economically distressed competitorsg y
Lithium-ion hybrid battery launch in 2009 (Nersac, France)
– First in the industry
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2009: Power solution strengthsIncreasing market share
O’Reilly Auto PartsMore than 1,000 Checker Auto Parts, Kragen A t P t d S h k’ A t S l tAuto Parts, and Schuck’s Auto Supply stores
Full line of automotive Super Start batteries
Optima® high performance automotive batteriesbatteries
Shipments to commence in February
Lithium-Ion production contracts
Azure DynamicsCommercial delivery vehicles for FedEx, Purolator, AT+T, Con Edison, etc.
Production to begin in 2010
Ford Plug-In contract announced 2/4/09Production to begin in 2012
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R. Bruce McDonaldExecutive Vice President and Chief Financial Officer
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Building Efficiency
Largest global supplier of commercial building services, HVAC equipment, building control
2008 Sales: $14.1 Billion
systemsHighly diversified: 1 million customersin 125 countries Non-
ResidentialA huge installed base leading to repeat business
Moderate cyclicality due to large service/renovation volume
94% Residential
EuropeNorth America
Asia19%
Europe29%
America53%
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Building Efficiency
A growth industryDemand for energy efficiency and sustainability continues to expand globally p g y
Increased integration of building, business, security and IT systems continues
Our competitive advantagesIndustry-leading HVAC service business
– 13,000 service providers, twice the size of #2 competitor
Well positioned in growing emerging markets
Unique product and service offerings
Expertise and capability across the entire building lif llifecycle
Strength in “institutional” vertical market
Renewable energy participation
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– More than 400 active projects
Historic changes in our marketsBuilding Efficiency
Began to see softness in U.S. commercial new construction markets in Q4 2008
New construction slow-downs and deferrals in Middle East due to low oil prices and high vacancy rates
U.S. housing starts and existing-home sales continue to declinesales continue to decline
– U.S. housing starts dropped by 47% year over year and 19% in the month fof December
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Building EfficiencyHigh level of recurring revenues
Building Efficiency commercial building sales
R i d i b d d
Service and recurring
Recurring revenues driven by demand for increased energy efficiency, greenhouse gas reductions, occupant comfortrecurring
revenues75%
comfort
Low overall economic sensitivity
New Construction
GlobalWorkplace
SolutionsTechnicalServices
Retrofit
Less MoreEconomic sensitivity
Construction25%
pSolutions
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Building EfficiencyHigh level of recurring revenues
Building Efficiency commercial building sales
Technical services
Service and recurring
Technical services– Van-based repair, maintain services via local
Johnson Controls branch offices– Typically contracts: one or more years– Not highly economically sensitive; deferredrecurring
revenues75%
Not highly economically sensitive; deferred maintenance leads to higher energy costs, equipment failure
– High renewal rates– Highest service penetration in N. America
New Construction
Highest service penetration in N. America– Service culture developing in China, Middle
East
Construction25%
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Building EfficiencyHigh level of recurring revenues
Building Efficiency commercial building sales
Global Workplace Solutions
Service and recurring
Global Workplace Solutions– On-site management and operation of facilities
– Primary customers: Global 1000
Multi year contractsrecurring revenues
75%
– Multi-year contracts
– Counter-cyclical: companies looking to cut
costs turn to outsourcing
New ConstructionConstruction
25%
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Building EfficiencyHigh level of recurring revenues
Building Efficiency commercial building sales
Solutions
Service and recurring
– Bundled offerings, driven by energy
efficiency improvements / alt. energy
– HVAC equipment and controls installations, recurring revenues
75%
C equ p e a d co o s s a a o s,
coupled with multi-year service contracts
– Popular in government and education
buildings as it requires no capital outlay and
New Construction
buildings as it requires no capital outlay and
provides positive cash flow; offsets bonding,
tax revenue issues
Primarily North AmericaConstruction25%
– Primarily North America
– Clinton Climate Initiative bringing
performance contracting to new markets
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Building EfficiencyHigh level of recurring revenues
Building Efficiency commercial building sales
Service and recurring
Retrofit– Primarily replacement of HVAC
equipment and controls at end of life or recurring revenues
75%failure
– Not generally deferrable for prolonged periodsIncludes engineering and installation
New Construction
– Includes engineering and installation services
Construction25%
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Building EfficiencyHigh level of recurring revenues
Building Efficiency commercial building sales
North AmericaNorth America– High concentration in "institutional"
buildings
Government healthcare educationService and
recurring -Government, healthcare, education
-Institutional sector historically performs significantly better than overall construction market; true this
recurring revenues
75%
overall construction market; true this cycle as well
-Slowing, but no radical decline
I t ti lNew
Construction International– Europe down mid-single digits– Middle East significantly lower
China up low double digit
Construction25%
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– China up low double-digit
Non-residential buildingsHigh level of visibility
BacklogUpdated quarterly
Si d k l d
Visibility of future performance
$4.7 B backlog (+8%) atSigned contract; work not yet completed
Converts to revenue in 6-9 months
Not included: Workplace Solutions or Unitary (residential) Products businesses
$4.7 B backlog ( 8%) at December 31, 2008
Pipeline stable-New construction down
(residential) Products businesses
Historically low backlog cancellation rate
– Contracts typically awarded after financing is in place & work has begun
-Existing buildings up single digits
-Strength in federal, healthcare and higher education
p g
– Tighter credit could have impact, but no atypical cancellations to date
Pipeline“Pipeline” tracking of bid activity
Precursor to backlog. 6-9 months of additional visibility
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Building Efficiency positivesFederal investments in energy efficiency
American Recovery and Reinvestment Bill (ARRP) of 2009
“We would prefer spending money on things
like making sure all Federal buildings are energy
ffi i t th t t i Significant funds for government and
school building energy efficiency
Johnson Controls advantaged to win
efficient so that taxpayers are saving money over
the long term.
“We will modernize more than 75% of federal
buildings and improve the energy efficiency of Johnson Controls advantaged to win
new business
– Government procurement processes
buildings and improve the energy efficiency of
two million American homes.
“In the process, we will put Americans to work
in new jobs—jobs constructing fuel efficient cars in place
– Long history of successful projects
j j g
and buildings.”
-President Barack ObamaJanuary 8 2009 Positive impact likely not until FY 2010January 8, 2009
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Building Efficiency positivesFederal investments in energy efficiency
Prepared to take advantage of the new opportunities
Existing Federal government business unit
– Expanded sales force
Enhanced vertical segment teams
– Expertise and focus around State government higher educationExpertise and focus around State government, higher education, K-12 schools and hospitals; all are slated to receive funding through the ARRP
Unmatched sales/service branch office network
Renewable Energy Center of Excellence
– Positions Johnson Controls to capture integrated renewables opportunities contemplated under the ARRP
Structure in place to support government accountability, transparency and assured outcomes
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2009: uncertainties continue
Withdrew quarterly and full year guidance December 16, 2008 Remainder of 2009
O i d t i i l tilForecast a loss for Q1 2009
Rapidly deteriorating automotive production globally
Our industries remain volatile
Uncertainties remain
Expecting a 2009 Q2 loss ofp g y
Financial viability of North American automotive customers uncertain
W i id ti l k t
Expecting a 2009 Q2 loss of similar scale to Q1 operating loss
Worsening residential markets
Uncertainties and industry volatility makes it difficult to provide meaningful
– Improved performance by Building Efficiency and Power Solutions b iguidance businesses
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Taking actionAligning our cost structure with the market environment
$495 million restructuring announced in Q4 2008
Additional actions
General hiring freezeExpected payback in less than 2.5 years
Workforce reductions
Plant consolidations
g
Wage freeze/reductions
Elimination of annual bonuses for corporate executivesPlant consolidations
– 18 Automotive Experience
– 2 Power Solutions
corporate executives
Investigating alternative work schedules (4-day weeks, etc)
– 1 Building Efficiency
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Taking actionProtecting liquidity
Liquidity5 year $2.05B revolver expires December 2011
Protection actions
Capital spending outlook reduced from
Minimal debt maturities in next 2 years
$1B of additional committed / uncommitted bank lines
$900 million to approximately $600-
$650 million
Held dividend payout steady
Debt covenant– Minimum shareholder equity of $1.3 billion
– Shareholder equity at 12/31/08: $8 3 billion
Held dividend payout steady
– Uncertainties around financial viability of
U.S. auto manufacturersShareholder equity at 12/31/08: $8.3 billion
Halted acquisition activity
Reduced voluntary pension contribution
$100 illi t ib ti i Q1 ill d f
Conservative financial management to ensure we – $100 million contribution in Q1; will defer
further payments while uncertainties
remain
management to ensure we manage the short-term environment while assuring long-term success
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Managing through the current environment
Maintain our long-term, sustainable growth philosophy
Balance near term performance while ensuring
Taking advantage of the opportunities created by this economic cycle to– Balance near term performance while ensuring
robust long-term business success
– Invest in innovation
M th h t t i t i t
this economic cycle to
Gain share
Improve – Manage the short-term environment in concert
with long-term goals
Aligning our cost structure with the realities of the market
pcompetitiveness
Enhance our leadership positionmarket
Benefit from global mega-trends
– Energy efficiency
leadership position
– Sustainability / Greenhouse gas reduction
– Emerging markets
Protect liquidity
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Protect liquidity
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