Johnson Controls, Inc.

is an automotive supplier company that manufactures automobile batteries, interiors, seating systems and building control systems and provides facility management services. Its gross revenues (sales) in 2010 are $5.1 Billion. The company s major expenses: $723 Million, Operating expenses for Research and Development. There is a slight dip in profits in 2009 due to the crisis in the auto industry, but by 2010 profits were at a 3-year high and beginning to recover.

Johnson Control Inc Gross Profit ($Billions)

5.1 5.5 3.7

2008

2009

2010

2010 Current ratio= 10.7/8.7 = 1.22 2009 Current ratio= 9.8/ 8.7 = 1.1 The current ratio increases shows that the company has improved their ability to pay the short term liability with cash or other short term assets with high liquidity. 2011 Account Receivable/Sales=6.1 b/34.3b= 17.7 % 2010 Account Receivable/Sales=5.5/28.5= 19% 2011 Inventory/ Sales= 1.8/34.3 = 5.2% 2010 Inventory/ Sales= 1.5/28.5 = 5.2% The trend that Johnson Control shows that they have improved their account receivable. That means the days that customers delay their pay to Johnson Control is shortened. This can help improve the liquidity of the company.The inventory turnover nearly remains the same shows that the company doesn t improve their inventory. The inventory increases with the sales revenue increase. Johnson Controls Inc mentioned these items in the notes of the 2010 Annual Report: principles of consolidation, use of estimates, fair value of financial instruments, cash and cash equivalents, receivables, inventories, PreProduction Costs Related to Long-Term Supply Arrangements, Property plant and equipment, intangibles and goodwill, long-lived assets, contracts, revenue recognition, research and development, earnings per share, foreign currency translations, derivative financial instruments, reclassifications, and new accounting pronouncements. The company makes a note that it made several adjusting entries to the financial statements in 2009; its methods of consolidating other entities in which it controls a less than 50% share; its policies on estimating conservative values for inventories and fair market values as well as cash equivalents and receivables. To summarize Johnson Control Inc s notes, they are trying to show why they chose to consolidate, estimate revenues and expenses, highlight the year s acquisitions, and credit agreements, etc. Lear Corporation is an automotive supplier, specializing in seating and electrical systems provided to auto manufacturers the world over with high quality parts. With annual revenues in 2010 just over $11.9 million, Lear Corporation grew revenue from 2009 by $2.2 million, while falling short of the overall revenue in 2008 of$13.7 million. With a cost of goods sold of $10.9 million, Lear Corporation had an annual gross profit of

$1.018 million dollars. Gross profits, as with revenue had a dip in 2009, however 2010 realized their largest profit in 3 years, with 2008 profit of $744,000 and profit of $360,200 in 2009.

Lear Gross Profit ($Millions)

1018 744 360.2

2008

2009

2010

Current ratio 2010: 4,385,500/2,818,500 = 1.56 Current ratio 2009: 3,787,000/2,400,800 = 1.58 Minimal change in current ratio, current liabilities and current assets changed at approximately the same rate in 2010, 2009. Total accounts receivable: 2010 - $1,758,400 2009 - $1,479,900 Inventory: 2010 - $544,200 2009 - $447,400 Sales: 2010 - $11,954,600 2009 - $9,739,600 Receivables % of sales: 2010 - 14.7% 2009 15.2% Inventory % of sales: 2010 4.6% 2009 4.6% Accounts receivable was higher when total sales were lower, meaning customers were withholding payment longer during a downward trend. Inventory as a percent of sales remained constant, meaning the supply chain was able to properly address and shifts in demand while revenue fluctuated. Lear Corporation emerged from Chapter 11 bankruptcy on September 9, 2009. Under the GAAP, Lear Corporation was required to adopt Fresh-start accounting. The Company elected to adopt fresh-start accounting as of November 7, 2009 to coincide with the timing of its normal October accounting period close. Since Lear Corporation just emerged from bankruptcy, they had to inform investors exactly where they stood financially as a new company. Robert Bosch GmbH is the world's largest supplier of automobile components, and has business relationships with virtually every automobile company in the world, generating 47,259 million Euros in revenue in 2010. Bosch was an early manufacturer of Anti-lock Braking System (ABS), and as time passed, Bosch became a leader in such specialized fields as traction control systems (TCS), the Electronic Stability Program (ESP), body electronics. Bosch is a leading player in car stereo systems and in-car navigation systems. Bosch invests 9% of its revenue on research and development, nearly double the industry average of 4.7%. In 2009, the automotive industry experienced its worst economic downturn for decades. Global vehicle production fell by 13 percent compared to the previous year and by 16 percent compared to 2007. The annual revenue for Bosch fell from 26475 million Euros in 2008 to 21716 million Euros in 2009. The annual profit before tax fell from 942 million Euros in 2008 to a loss of 1,197 million Euros in 2009 but recovered in 2010 to profit of a whopping 3,485 million Euros.

Bosch Gross Profit (Million Euro)

4000 2000 942 0 1 -2000 2008 2 -1197 2009 3 2010 3485

Current Ratio 2010 = 21564/12164= 1.772 Current Ratio 2009 = 17647/10851 = 1.626 The current ratio improved in 2010 compared to 2009 owing to the improved economic conditions and overall stability of the market. Total accounts receivable in 2010 8017 million Euros Inventories in 2010 6780 million Euros Sales 2010:- 47,259 million Euros Receivable % of sales = > 2010: 16.9% Inventory % of sales => 2010: 14.34% 2009 6840 million Euros 2009-5432 million Euros 2009:- 38,174 million Euros 2009: 17.9% 2009: 14.22%

Account receivables were high in 2009 as the Automotive OEM s held off payment to their suppliers. Inventory as a percent of sales remained constant over 2009 and 2010 highlighting the fact that Bosch was able to manage its inventories even during the downtime. Bosch reported the method of consolidation and various accounting principles such as the definition of Goodwill, Intangible Assets and Liabilities. The notes also mention the currency conversion rate used to translate Balance Sheets from subsidiaries across the globe to the consolidated balance sheet statement. In my opinion these notes are provided so as to present a clear picture as to what were the assumptions made and what were the techniques used to arrive at the numbers presented in the balance sheet. These notes try to ensure that there is as little of ambiguity as possible while interpreting the balance sheet The differences we noted in our research mainly involves 2 things: Whereas the two American companies, Johnson Controls and Lear, used GAAP to publicize their financials, Bosch, a German company, uses an extremely conservative approach to liabilities and amortization, etc. Also, we noticed that across continents and markets, 2009 was a singularly bad year for all three companies, followed by a great return in 2010. The German accounting system is based on law and tax codes and is extremely conservative. Evidence of the extreme conservatism is apparent in the financial statements; the amortization period for any intangible item is five years. In the United States, a maximum of 40 years is allowed. This would reflect in the balance sheet as a significantly higher cost of liability as compared to companies using US GAAP.