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Johnson Controls Reports Record Third-Quarter Sales and Earnings; Updates Guidance

MILWAUKEE, July 20 -- Johnson Controls, Inc. (JCI) today reported record sales and earnings for the third quarter of fiscal 2006.

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Sales for the 2006 third quarter increased 19% to $8.4 billion from $7.1 billion for the 2005 quarter. Building efficiency sales were double the level a year ago and power solutions sales were one-third higher. Interior experience sales were lower than the year-ago period reflecting weaker automotive markets. Operating income for the 2006 quarter was $280 million, including a restructuring charge of $197 million, compared with $368 million last year. Income from continuing operations, including non-recurring tax benefits, was $336 million versus $255 million the prior year. Diluted earnings per share from continuing operations were 30% higher, reaching $1.70 vs. $1.31.

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"Johnson Controls continues to assertively grow its businesses and take actions to improve its profitability," said John M. Barth, Chairman and Chief Executive Officer. "The integration of our 2005 acquisitions, that have expanded our market penetration and strengthened our capabilities for our customers, is progressing well. The set of restructuring initiatives announced during the third quarter reflect our long-term commitment to growth and strengthened competitive positions."

"This quarter's results show the value of Johnson Controls business and geographic diversification," said Mr. Barth. "While cost recoveries from automotive customers and battery replacement demand were lower than our expectations in April, these shortfalls were mitigated by strong performances by our European interiors and North American building efficiency systems businesses. The total building efficiency business performed in line with our expectations, and for the first time became the largest contributor to consolidated earnings, generating 40 percent of our operating income in the quarter."

Mr. Barth added, "As we implement our strategies for sustained profitable growth, our employees have experienced significant change. We wish to thank them for their support and dedication to our customers and to our goals."

The restructuring charge ($137 million after-tax) is associated with initiatives to improve the profitability of interior experience and building efficiency operations in North America and Europe. The tax benefits of $141 million are primarily associated with the reversal of a deferred tax asset valuation allowance in Germany. The net impact of these two items was a benefit of $0.02 per share.

The company's financial position continued to strengthen due to earnings growth and an improvement in working capital. Total debt to total capitalization was 42% at June 30, 2006 versus 45% at the end of the second quarter of 2006.

Business Results

Discussion of the business results excludes the impact on operating income of the restructuring charge.

Building efficiency sales were $2.8 billion compared with 2005 revenues of $1.4 billion. The increase was primarily due to the additional revenues associated with the December 2005 York acquisition as well as double-digit growth in the North American services market and global facility management. Operating income also doubled, reaching $190 million versus $93 million a year ago reflecting the higher revenues as well as successful acquisition integration initiatives. The backlog of uncompleted contracts at June 30, 2006 was $3.7 billion, an increase of 16% over the prior year amount (pro- forma including York). Johnson Controls added that its domestic systems and services orders from the nonresidential buildings market were up substantially, aided by its ability to offer customers a complete control and mechanical equipment solution for building comfort and energy efficiency.

Interior experience sales were $4.7 billion, down 6% from $5.0 billion in 2005 reflecting lower sales in North America, Europe and Asia. While North American production of light vehicles was only 1% lower, Johnson Controls sales decreased 8% in the region due to its exposure to weak light truck demand impacting every automaker in the domestic market. The company's sales in Europe were 6% below the prior year, approximately in line with automotive vehicle production, which reflects fewer production days in the current year. Operating income was $168 million, down 16% from $200 million. North American income declined as lower sales and higher commodity and launch costs offset improvements in operational efficiencies. European results were markedly higher reflecting substantial improvements in its cost structure and operational performance.

Power solutions sales increased 33% to $886 million from $665 million mainly due to volume from the July 2005 acquisition of the Delphi battery business and a full quarter of recently launched original equipment and aftermarket business. Operating income increased 59% to $119 million, from $75 million for the prior year. The current year amount includes a $33 million positive legal settlement associated with the recovery of previously incurred environmental costs.

Fourth-Quarter and 2006 Full-Year Outlook

Johnson Controls said that it continues to anticipate full-year sales approximating $32 billion as the positive impact of a stronger Euro versus the U.S. dollar will be offset by an unfavorable vehicle production mix. Diluted earnings per share from continuing operations for 2006 are forecast in a range of $5.25 to $5.30 for the full year and $1.86 to $1.91 for the fourth quarter. The full-year forecast, which includes the restructuring charge and one-time tax benefits, was narrowed from the $5.25 to $5.35 range issued in April 2006 to reflect lower than anticipated North American interior experience sales and operating income.

Johnson Controls is a global leader in interior experience, building efficiency and power solutions. The company provides innovative automotive interiors that help make driving more comfortable, safe and enjoyable. For buildings, it offers products and services that optimize energy use and improve comfort and security. Johnson Controls also provides batteries for automobiles and hybrid electric vehicles, along with systems engineering and service expertise. Johnson Controls , founded in 1885, is headquartered in Milwaukee, Wisconsin. For additional information, visit http://www.johnsoncontrols.com/ .

Johnson Controls, Inc. ("the Company") has made forward-looking statements in this document pertaining to its financial results for fiscal 2006 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, including information concerning possible or assumed future risks. For those statements, the Company cautions that numerous important factors, such as automotive vehicle production levels and schedules, the ability to mitigate the impact of higher raw material and energy costs, the strength of the U.S. or other economies, currency exchange rates, cancellation of commercial contracts, labor interruptions, the successful integration of York, the ability to execute on restructuring actions according to anticipated timelines and costs and the ability to deliver planned levels of profitability in Germany, as well as those factors discussed in the Company's Form 8-K filing (dated January 19, 2006) and the risk factors as filed with the SEC January 9, 2006, 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 June 30,
                                                    2006               2005

  Net sales                                       $8,390             $7,062
  Cost of sales                                    7,177              6,162
    Gross profit                                   1,213                900

  Selling, general and administrative expenses       736                532
  Restructuring costs                                197                  -
    Operating income                                 280                368

  Interest expense - net                             (65)               (23)
  Equity income                                       28                 19
  Miscellaneous - net                                (10)                (8)

  Income from continuing operations before income
   taxes and minority interests                      233                356

  Provision (benefit) for income taxes              (111)                94
  Minority interests in net earnings of
   subsidiaries                                        8                  7

  Income from continuing operations                  336                255

  Income from discontinued operations,
   net of income taxes                                 2                  -

  Net income                                        $338               $255

  Diluted earnings per share from
   continuing operations                           $1.70              $1.31

  Diluted earnings per share                       $1.71              $1.31

  Diluted weighted average shares                    197                195
  Shares outstanding at period end                   195                192

                            JOHNSON CONTROLS, INC.

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

                                                  Nine Months Ended June 30,
                                                   2006               2005

  Net sales                                      $24,085            $20,579
  Cost of sales                                   20,902             18,046
    Gross profit                                   3,183              2,533

  Selling, general and administrative expenses     2,209              1,693
  Restructuring costs                                197                210
    Operating income                                 777                630

  Interest expense - net                            (179)               (77)
  Equity income                                       72                 59
  Miscellaneous - net                                (10)               (24)

  Income from continuing operations before income
   taxes and minority interests                      660                588

  Provision (benefit) for income taxes               (37)                95
  Minority interests in net earnings of
   subsidiaries                                       32                 28

  Income from continuing operations                  665                465

  Income and gain on sale from discontinued
   operations, net of income taxes                     3                161

  Net income                                        $668               $626

  Diluted earnings per share from
   continuing operations                           $3.39              $2.39

  Diluted earnings per share                       $3.40              $3.22

  Diluted weighted average shares                    196                194
  Shares outstanding at period end                   195                192

                            JOHNSON CONTROLS, INC.

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

                                           June 30,  September 30,  June 30,
                                             2006       2005         2005
    ASSETS
    Cash and cash equivalents                $380       $171         $385
    Accounts receivable - net               5,686      4,987        4,529
    Inventories                             1,740        983          915
    Assets of discontinued operations         153          -            -
    Other current assets                    1,385        998          896
           Current assets                   9,344      7,139        6,725

    Property, plant and equipment - net     3,970      3,581        3,294
    Goodwill - net                          5,758      3,733        3,670
    Other intangible assets - net             779        289          274
    Investments in partially-owned
     affiliates                               488        445          420
    Other noncurrent assets                 1,717        957          778
           Total assets                   $22,056    $16,144      $15,161

    LIABILITIES AND SHAREHOLDERS'
     EQUITY
    Short-term debt and current portion
     of long-term debt                        833        765          614
    Accounts payable and accrued
     expenses                               5,573      4,686        4,318
    Liabilities of discontinued
     operations                                40          -            -
    Other current liabilities               2,237      1,390        1,350
           Current liabilities              8,683      6,841        6,282

    Long-term debt                          4,180      1,577        1,632
    Minority interests in equity of
     subsidiaries                             136        196          143
    Other noncurrent liabilities            2,148      1,472        1,327
    Shareholders' equity                    6,909      6,058        5,777
           Total liabilities and
            shareholders' equity          $22,056    $16,144      $15,161

                            JOHNSON CONTROLS, INC.

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

                                                        Three Months
                                                        Ended June 30,
                                                   2006                2005
  Operating Activities
  Net income                                       $338                $255

  Adjustments to reconcile net income
   to cash provided by operating activities:
      Depreciation and amortization                 178                 151
      Equity in earnings of
       partially-owned affiliates,
       net of dividends received                    (10)                (14)
      Minority interests in net
       earnings of subsidiaries                       8                   7
      Deferred income taxes                        (263)                 84
      Non-cash restructuring                         51                   -
      Other - net                                    20                  29
      Changes in working capital, excluding
       acquisition of businesses:
        Receivables                                  93                (120)
        Inventories                                (119)                (62)
        Accounts payable and accrued liabilities    226                  57
        Change in other assets and liabilities      154                 (40)
         Cash provided by operating activities      676                 347

  Investing Activities
  Capital expenditures                             (176)               (104)
  Sale of property, plant and equipment               -                   3
  Acquisition of businesses, net of cash acquired   (11)                (73)
  Business divestitures                               -                   -
  Other - net                                       (20)                (19)
         Cash used in investing activities         (207)               (193)

  Financing Activities
  Increase (decrease) in short and
   long-term debt - net                            (221)                  4
  Payment of cash dividends                         (54)                (48)
  Other - net                                        32                  30
         Cash used in financing activities         (243)                (14)

  Increase in cash and cash equivalents            $226                $140

                            JOHNSON CONTROLS, INC.

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

                                                          Nine Months
                                                         Ended June 30,
                                                    2006               2005
  Operating Activities
  Net income                                        $668               $626

  Adjustments to reconcile net income
   to cash provided by operating activities:
      Depreciation and amortization                  524                472
      Equity in earnings of partially-owned
       affiliates, net of dividends received          (9)               (42)
      Minority interests in net
       earnings of subsidiaries                       32                 28
      Gain on sale of discontinued operations          -               (145)
      Deferred income taxes                         (343)               (13)
      Non-cash restructuring                          51                 46
      Other - net                                     38                 24
      Changes in working capital, excluding
       acquisition of businesses:
        Receivables                                   74               (369)
        Inventories                                 (160)               (64)
        Accounts payable and accrued liabilities      54                105
        Change in other assets and liabilities       133                 34
          Cash provided by operating activities    1,062                702

  Investing Activities
  Capital expenditures                              (438)              (387)
  Sale of property, plant and equipment               13                 11
  Acquisition of businesses, net of
   cash acquired                                  (2,597)              (106)
  Business divestitures                                -                687
  Other - net                                         45                (78)
          Cash provided by (used in)
           investing activities                   (2,977)               127

  Financing Activities
  Increase (decrease) in short and
   long-term debt - net                            2,131               (443)
  Payment of cash dividends                         (163)              (144)
  Other - net                                        156                 44
          Cash provided by (used in)
           financing activities                    2,124               (543)

  Increase in cash and cash equivalents             $209               $286

                                FOOTNOTES

  1. Business Unit Summary

                                   Three Months           Nine Months
                                  Ended June 30,         Ended June 30,
    (in millions)                  (unaudited)            (unaudited)
                                2006    2005    %     2006     2005     %
    Net Sales
    Building efficiency        $2,823  $1,406  101%   $7,121   $4,216   69%
    Interior experience         4,681   4,991   -6%   14,229   14,298    0%
    Power solutions               886     665   33%    2,735    2,065   32%
                               $8,390  $7,062        $24,085  $20,579

    Operating Income
    Building efficiency          $190     $93  104%     $283     $179   58%
    Interior experience           168     200  -16%      388      426   -9%
    Power solutions               119      75   59%      303      235   29%
                                 $477    $368           $974     $840
    Restructuring costs          (197)      -           (197)    (210)
                                 $280    $368           $777     $630

  Building efficiency - Provides facility systems and services including
  comfort, energy and security management for the non-residential buildings
  market and provides heating, ventilating, air conditioning and
  refrigeration products and services for the residential and non-
  residential building markets.

  Interior 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 -  Designs and manufactures automotive batteries for the
  replacement and original equipment markets.

  2. Acquisitions

  On December 9, 2005, the Company completed its acquisition of York
  International Corporation (York).  The Company paid $56.50 for each
  outstanding share of common stock plus the assumption of debt.  The total
  value of the acquisition was approximately $3.2 billion, including
  approximately $565 million of debt.

  3. Discontinued Operations

  In December 2005, the Company acquired York's Bristol Compressor business
  as part of the York acquisition.  On July 12, 2006, the Company announced
  its agreement to divest its 50% interest in Scroll Technologies, Inc. The
  Company is continuing to explore strategic alternatives for the remainder
  of the business.

  In February 2005, the Company completed the sale of its engine electronics
  business to Valeo for approximately $316 million euro, or approximately
  $419 million.  This non-core business was a part of the Sagem SA
  automotive electronics business that was acquired in fiscal 2002 and was
  included in the interior experience - Europe segment.

  In March 2005, the Company completed the sale of its Johnson Controls
  World Services Inc. subsidiary to IAP Worldwide Services Inc. for
  approximately $260 million.  This non-strategic business was acquired in
  fiscal 1989 from Pan Am Corporation and was included in the building
  efficiency segment.

  The Bristol Compressor business, the engine electronics business and the
  Johnson Controls World Services Inc. subsidiary are reported as
  discontinued operations in the Consolidated Financial Statements in
  accordance with Statement of Financial Accounting Standards No. 144,
  "Accounting for the Impairment or Disposal of Long-Lived Assets."

  4. Restructuring Costs

  As part of its continuing efforts to reduce costs and improve the
  efficiency of its global operations, the Company announced a restructuring
  plan in the third quarter of fiscal 2006 and recorded a $197 million
  restructuring charge.

  The restructuring charge relates to cost reduction initiatives mainly in
  its interior experience and building efficiency businesses and includes
  workforce reductions and plant consolidations. The company expects to
  substantially complete the initiatives over the next 12 months. The
  automotive-related restructuring is focused on improving the profitability
  associated with the manufacturing and supply of instrument panels,
  headliners and other interior components in North America. In Europe, it
  reflects actions intended to increase the efficiency of its seating
  component operations. The charges associated with the building efficiency
  business mostly relate to Europe where the company is launching its
  systems redesign initiative. Systems redesign was successfully completed
  in the North American building efficiency branch offices last year,
  resulting in improved profitability and increased market opportunities.

  5. Income Taxes

  In the second quarter of fiscal year 2006, the Company's estimated annual
  base effective income tax rate for continuing operations declined to 21.0%
  from the 24.3% used in the first quarter of fiscal year 2006 and from the
  25.7% for the prior fiscal year, primarily due to increased income in
  certain foreign jurisdictions with a rate of tax lower than the U.S.
  statutory tax rate, decreased income in higher-tax jurisdictions and
  certain tax planning initiatives. In addition, the Company reversed a
  valuation allowance of $32 million attributable to Mexican operating loss
  and tax credit carryforwards based on an assessment of expected future
  profitability and also recorded $31 million of tax expense related to the
  American Jobs Creation Act of 2004.

  In the third quarter of fiscal year 2006, the Company completed an
  analysis of its German operations and, based on cumulative income over a
  36 month period, an assessment of expected future profitability in Germany
  and finalization of the 2006 restructuring plan, determined that it was
  more likely than not that the tax benefits of certain operating loss and
  tax credit carryforwards in Germany would be utilized in the future. As
  such, the Company reversed $131 million attributable to these operating
  loss and tax credit carryforwards in the current quarter as a credit to
  income tax expense. In addition, the Company recorded a $10 million tax
  benefit from a favorable tax audit conclusion in a foreign jurisdiction
  and recognized an $18 million discrete period tax benefit related to third
  quarter 2006 restructuring costs using a tax rate of 30.6%.

  The table below shows a reconciliation of the tax provision, as reported,
  for the three and nine months ended June 30, 2006 (amounts in millions):

                            Three Months Ended         Nine Months Ended
                              June 30, 2006              June 30, 2006
                            Amount     Tax Rate       Amount     Tax Rate
                               (unaudited)               (unaudited)

  Federal, state and
   foreign income tax
   expense                    48        21.0%          138        21.0%

  Restructuring charge       (18)                      (18)
  Valuation allowance
   releases                 (131)                     (163)
  Uncertain tax positions    (10)                      (10)
  Foreign dividend
   repatriation                -                        31
  Change in tax status of
   foreign subsidiary          -                       (11)
  Disposition of a joint
   venture                     -                        (4)
  Tax benefit, as reported $(111)      -47.6%         $(37)       -5.6%
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