Johnson Controls 2010 Annual Report Download - page 94

Download and view the complete annual report

Please find page 94 of the 2010 Johnson Controls annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

94
The Company’s base effective income tax rate for continuing operations for fiscal years 2010, 2009 and 2008 was
18.1%, 22.7% and 21.0%, respectively. The rate remained below the U.S. statutory rate due to continuing global tax
planning initiatives and income in certain non-U.S. jurisdictions with a rate of tax lower than the U.S. statutory tax
rate. The Company’s base effective tax rates were further adjusted as a result of the following discrete items (in
millions):
Year Ended September 30,
2010
2009
2008
Federal, state and foreign income tax
expense at base effective income tax rate
$
319
$
(72)
$
278
Restructuring charges
-
8
43
Impairment charges
-
26
-
Debt conversion costs
-
(15)
-
Valuation allowance adjustments
(111)
252
Uncertain tax position adjustments
(27)
(72)
-
Change in tax status of foreign subsidiary
-
(89)
-
Interest refund
-
(6)
-
Medicare Part D
16
-
-
Provision for income taxes
$
197
$
32
$
321
Restructuring Charge
In the second quarter of fiscal year 2009, the Company recorded a $27 million discrete period tax adjustment related
to the second quarter 2009 restructuring costs using a blended statutory tax rate of 19.2%. Due to the tax rate change
in the third quarter of fiscal 2009, the discrete period tax adjustment decreased by $19 million for a total tax
adjustment of $8 million.
In the fourth quarter of fiscal 2008, the Company recorded a $43 million discrete period tax adjustment related to
the fourth quarter 2008 restructuring charge using a blended effective tax rate of 12.4%.
Impairment Charges
In the first quarter of fiscal 2009, the Company recorded a $30 million discrete period tax adjustment related to first
quarter 2009 impairment costs using a blended statutory tax rate of 12.6%. Due to the change in the base effective
tax rate in fiscal 2009, the discrete period tax adjustment decreased by $4 million for a total tax adjustment of $26
million.
Debt Conversion Costs
In the fourth quarter of fiscal 2009, the Company recorded a $15 million discrete period tax adjustment related to
debt conversion costs using an effective tax rate of 36.5%.
Valuation Allowances
The Company reviews its deferred tax asset valuation allowances on a quarterly basis, or whenever events or
changes in circumstances indicate that a review is required. In determining the requirement for a valuation
allowance, the historical and projected financial results of the legal entity or consolidated group recording the net
deferred tax asset are considered, along with any other positive or negative evidence. Since future financial results
may differ from previous estimates, periodic adjustments to the Company's valuation allowances may be necessary.
In fiscal 2010, the Company recorded an overall decrease to its valuation allowances of $87 million. This was
comprised of a $111 million decrease in income tax expense with the remaining amount impacting the consolidated
statement of financial position.
In the fourth quarter of fiscal 2010, the Company performed an analysis related to the realizability of its worldwide
deferred tax assets. As a result, and after considering tax planning initiatives and other positive and negative
evidence, the Company determined that it was more likely than not that the deferred tax assets primarily within