Johnson Controls 2012 Annual Report Download - page 86

Download and view the complete annual report

Please find page 86 of the 2012 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

86
specified conditions, the Company will contribute to certain savings plans based on the employees’ eligible pay
and/or will match a percentage of the employee contributions up to certain limits. Matching contributions charged to
expense amounted to $65 million, $67 million and $42 million for the fiscal years ended 2012, 2011 and 2010,
respectively.
Multiemployer Benefit Plans
The Company contributes to multiemployer benefit plans based on obligations arising from collective bargaining
agreements related to certain of its hourly employees in the U.S. These plans provide retirement benefits to
participants based on their service to contributing employers. The benefits are paid from assets held in trust for that
purpose. The trustees typically are responsible for determining the level of benefits to be provided to participants as
well as for such matters as the investment of the assets and the administration of the plans.
The risks of participating in these multiemployer benefit plans are different from single-employer benefit plans in
the following aspects:
Assets contributed to the multiemployer benefit plan by one employer may be used to provide benefits to
employees of other participating employers.
If a participating employer stops contributing to the multiemployer benefit plan, the unfunded obligations
of the plan may be borne by the remaining participating employers.
If the Company stops participating in some of its multiemployer benefit plans, the Company may be
required to pay those plans an amount based on its allocable share of the underfunded status of the plan,
referred to as a withdrawal liability.
The Company participates in over 300 multiemployer benefit plans, primarily related to its Building Efficiency
business in the U.S., none of which are individually significant to the Company. The number of employees covered
by the Company’s multiemployer benefit plans has remained consistent over the past three years, and there have
been no significant changes that affect the comparability of fiscal 2012, 2011 and 2010 contributions. The Company
recognizes expense for the contractually-required contribution for each period. The Company contributed $47
million, $51 million and $46 million to multiemployer benefit plans in fiscal 2012, 2011 and 2010, respectively.
Based on the most recent information available, the Company believes that the present value of actuarial accrued
liabilities in certain of these multiemployer benefit plans may exceed the value of the assets held in trust to pay
benefits. Currently, the Company is not aware of any significant multiemployer benefits plans for which it is
probable or reasonably possible that the Company will be obligated to make up any shortfall in funds. Moreover, if
the Company were to exit certain markets or otherwise cease making contributions to these funds, the Company
could trigger a withdrawal liability. Currently, the Company is not aware of any significant multiemployer benefit
plans for which it is probable or reasonably possible that the Company will withdraw from the plan. Any accrual for
a shortfall or withdrawal liability will be recorded when it is probable that a liability exists and it can be reasonably
estimated.
Plan Assets
The Company’s investment policies employ an approach whereby a mix of equities, fixed income and alternative
investments are used to maximize the long-term return of plan assets for a prudent level of risk. The investment
portfolio primarily contains a diversified blend of equity and fixed income investments. Equity investments are
diversified across domestic and non-domestic stocks, as well as growth, value and small to large capitalizations.
Fixed income investments include corporate and government issues, with short-, mid- and long-term maturities, with
a focus on investment grade when purchased and a target duration close to that of the plan liability. Investment and
market risks are measured and monitored on an ongoing basis through regular investment portfolio reviews, annual
liability measurements and periodic asset/liability studies. The majority of the real estate component of the portfolio
is invested in a diversified portfolio of high-quality, operating properties with cash yields greater than the targeted
appreciation. Investments in other alternative asset classes, including hedge funds and commodities, are made via
mutual funds to diversify the expected investment returns relative to the equity and fixed income investments. As a
result of our diversification strategies, there are no significant concentrations of risk within the portfolio of
investments.
The Company’s actual asset allocations are in line with target allocations. The Company rebalances asset allocations
as appropriate, in order to stay within a range of allocation for each asset category.