Johnson Controls Inc. has released details of the restructuring activities it has planned for the fourth quarter.
The restructuring actions are aimed at keeping resources in line with growth strategies and cutting costs for global operations. The activities, which include workforce reductions and plant consolidations in automotive experience, building efficiency and power solutions, have caused a pre-tax charge of $225 to $275 million for the fourth quarter.
Employee-related costs make up $180 to 210 million of the charge, while asset impairment charges account for $30 to 45 million and miscellaneous costs comprise the remaining $15 to 20 million. Most of the restructuring will be completed by fiscal 2014.
Related to the changes, Johnson Controls’ tax valuation allowance will increase by $30 to 35 million because of deferred tax assets in Power Solutions China, which recently ceased operations at the Shanghai battery plant.
In addition, the company has adjusted its accounting policy for pension and post-retirement benefit expenses. Using a mark-to-market accounting approach, any pension/post-retirement actuarial and investment gains or losses will be recorded in the fourth quarter of each fiscal year. Before, deferred actuarial gains or losses were amortized and asset returns were smoothed over several years.
This change will not affect future pension and post-retirement funding or benefits paid to participants, the company said. As a result of the mark-to-market change, retrospective revisions will be made for current and prior year financial statements. The financial implications are under review, but the fourth quarter net pre-tax adjustment will likely be $425 to 475 million.
