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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-5097
JOHNSON CONTROLS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
WISCONSIN 39-0380010
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
5757 N. GREEN BAY AVENUE
P.O. BOX 591
MILWAUKEE, WISCONSIN 53201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (414) 228-1200
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- - --------------------------------------------- ---------------------------------------------
<S> <C>
Common Stock, $.16 2/3 par value New York Stock Exchange
Rights to Purchase Common Stock New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
<TABLE>
<CAPTION>
AGGREGATE MARKET VALUE NUMBER OF SHARES
OF NONAFFILIATES' SHARES OUTSTANDING AT
TITLE OF EACH CLASS AS OF DECEMBER 1, 1995 DECEMBER 1, 1995
- - -------------------------------------------------------- ------------------------- -----------------
<S> <C> <C>
Common Stock, $.16 2/3 par value........................ $ 2,816,758,223 41,120,558
Series D Convertible Preferred Stock, $1.00 par value,
$512,000 liquidation value............................ $ 212,949,375 310.875
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV incorporate by reference portions of the Annual Report
to shareholders for the year ended September 30, 1995.
Part III incorporates by reference portions of the Proxy Statement dated
December 20, 1995.
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JOHNSON CONTROLS, INC.
----------------------
Index to Annual Report on Form 10-K
Year Ended September 30, 1995
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Page
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PART I.
ITEM 1. BUSINESS..................................................................... 3
ITEM 2. PROPERTIES................................................................... 13
ITEM 3. LEGAL PROCEEDINGS............................................................ 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS........................................................ 18
EXECUTIVE OFFICERS OF THE REGISTRANT......................................... 19
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS........................................... 21
ITEM 6. SELECTED FINANCIAL DATA..................................................... 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................ 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................. 21
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE................................................................ 21
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS............................................ 22
ITEM 11. EXECUTIVE COMPENSATION...................................................... 22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT..................................................... 22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.............................................................. 22
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K................................................... 22
INDEX TO EXHIBITS........................................................... 31-34
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PART I
ITEM 1 BUSINESS
General Development of Business
Johnson Controls, Inc. is a Wisconsin corporation organized in 1885. Its
principal office is located at 5757 N. Green Bay Avenue, Milwaukee, Wisconsin
53201-0591 (Telephone: 414-228-1200). From 1885 through 1978 the company's
operations were predominantly in the controls business. Through subsequent
business acquisitions the company's operations have been expanded to include
three additional business segments: battery, automotive and plastics.
In 1978 the company acquired Globe-Union, Inc. and thereby became a leading
domestic manufacturer of automotive batteries for the United States replacement
market and the combined domestic replacement and original equipment market.
In 1985 the company acquired Hoover Universal, Inc., a manufacturer of
automotive seating and seating components, plastic containers and plastics
blowmolding machinery. As a result of the acquisition, the company became the
leading independent producer of automotive seating systems and plastic beverage
bottles for these North American markets.
In 1989 the company acquired Pan Am World Services, Inc. (name subsequently
changed to Johnson Controls World Services Inc., "World Services"), a leading
provider of operations and maintenance services for military bases, space
centers and other government facilities worldwide. This acquisition
significantly expanded the controls segment's operations and maintenance
services business.
Financial Information About Business Segments
Business segment financial information on Pages 20 through 23 and Note 13
"Segment Information" of Notes to Consolidated Financial Statements on page 38
of the 1995 Annual Report to Shareholders is incorporated herein by reference.
Products and Services
Automotive Segment
The automotive segment is engaged in the design and manufacture of
complete seat systems, seating components and interior trim systems for North
American and European manufacturers of cars, vans and light trucks. In
addition to its U.S. operations, the segment has operations in Canada,
Europe, Mexico and South Africa through both wholly-owned and partially-owned
businesses. The segment operates 53 wholly-owned and 19 majority-owned
manufacturing or assembly facilities and is the largest independent
manufacturer of complete seating systems for both the North American and
European automotive industries. Worldwide, the segment is among the top 20
automotive suppliers, with complete seat
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sales to eight of the top ten automobile companies in the world, and
component sales to all of the top ten.
The segment has 30 wholly or majority-owned assembly plants that
supply automotive manufacturers with complete seats on a "just-in-time"
basis. All foam and metal seating components, covers and seat mechanisms
are shipped to these plants from the segment's production facilities or
outside suppliers. The seats are then assembled to specific order and
delivered on a predetermined schedule directly to an automotive assembly
line. Sales of complete seats account for approximately 75% of total
segment sales.
Other manufactured products for the original equipment market,
including seat frames, tracks, mechanisms, covers, foam cushions and
interior trim systems, account for the remaining 25% of segment sales.
In fiscal 1996, the company has acquired a majority
interest in Roth Freres S.A., a major supplier of seating and interior
components to the European automotive industry. Through the acquisition,
the company will become a majority owner of certain complete seat operations
and add to its headliner market share.
Controls Segment
The controls segment is a major worldwide supplier of control systems,
services and products providing energy management, temperature and
ventilation control, security and fire safety for nonresidential buildings.
Building control systems are sold, installed and serviced primarily by
employee sales engineers, application engineers and mechanics working out of
branch offices located in approximately 260 principal cities throughout the
world. Control system products are manufactured in five domestic and six
foreign facilities. The segment is also a leading supplier of integrated
facility management services for commercial buildings worldwide, as well as
for government facilities. Commercial operations and maintenance services
provide a wide range of on-site building support such as maintenance,
security, food services, etc. Government operations and maintenance services
are provided for military bases, space centers and other government
facilities. The segment also manufactures a broad line of electric and
electronic products for sale to original equipment manufacturers, wholesalers
and distributors of air-conditioning, refrigeration, commercial and
residential heating, water-pumping and gas-burning equipment. Overall,
approximately 85% of the controls segment's sales are derived from the
installation and service of control systems and the management of facility
operations for the existing worldwide building market, while 15% originates
from new construction.
Plastics Segment
The plastics segment is one of the world's largest producers of
polyethylene terephthalate (PET) plastic
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containers. Products include plastic soft drink bottles and plastic
containers for other beverages (isotonic sports drink, liquor, water and
juice), food, household and personal care items. High-heat technology, which
provides the ability to manufacture PET containers that can be filled at 185
degrees Fahrenheit, has expanded the segment's ability to serve the food,
sports drink and juice industries. Beverage bottles are molded at 15
domestic plants and are sold to bottlers. In addition, the segment produces
plastic preforms in both North America and Europe, which are blowmolded into
bottles by customers in their own facilities. The segment entered the
European plastic container market in fiscal 1989 by acquiring a Belgian
manufacturer. Through subsequent business acquisitions, the segment has
expanded its European container operations to Italy, France, the United
Kingdom and the Czech Republic.
The plastics segment is also the largest U.S. manufacturer of
blowmolding machinery and possesses the broadest range of blowmolding
machinery technology. Machinery is designed and manufactured for five
principal plastics processing systems: reciprocating extrusion blowmolding,
continuous extrusion blowmolding, injection blowmolding, accumulator head
blowmolding and structural foam. Molds for use in blowmolding and injection
molding machinery are also produced. Blowmolding machinery is manufactured
for North American, European and other markets through operations in the
Czech Republic, Germany, Italy and the United States.
Plastic products, including injection-molded gears, fan shrouds and
radiator end tanks, are produced by the segment for the North American
automotive original equipment market.
Battery Segment
The battery segment is a leading manufacturer of lead-acid automotive
batteries for the North American replacement market as well as for the
combined domestic replacement and original equipment market. Automotive
batteries, which account for over 90% of the segment's sales, are sold
primarily under private label to automotive replacement battery retailers
and distributors and to automobile manufacturers as original equipment.
Manufacturing is conducted at 12 plants in the U.S. and a plant in Mexico.
The battery segment also produces and markets lead-acid batteries for
use in a variety of industrial and consumer applications. The most
important are those based on gelled electrolyte technology and absorbent
glass mat (AGM) technology. The gelled electrolyte batteries are portable,
maintenance-free, rechargeable units used in various applications including
cable/telecommunication and deep cycling applications. The AGM batteries
are sealed, maintenance free, rechargeable units used mainly in
uninterruptible power supply (UPS) systems for computers,
telecommunications, and other applications where a UPS system is required.
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Major Customers and Competition
All four of the company's business segments have sales to the
automotive industry. Each of the four major automotive manufacturers
accounted for between approximately 5% and 11% of the company's net sales in
each of the fiscal years 1995, 1994 and 1993. Chrysler Corporation
accounted for 11% of the company's net sales in fiscal 1995, 9% in 1994 and
8% in 1993. General Motors Corporation accounted for 10%, 8% and 9% in
1995, 1994 and 1993, respectively.
Automotive Segment
As a supplier to the automotive original equipment market, the
segment faces competition from other automotive parts suppliers and,
with respect to certain products, from the automobile manufacturers which
themselves produce or have the capability to produce many of the products
supplied by the segment. Competition is based on quality, price and
just-in-time manufacturing and delivery. Design, engineering and product
planning are becoming increasingly important factors. The segment competes
in North America with four independent suppliers of complete seats, four
independent suppliers of foam seating components and six independent
manufacturers of metal seating components. In Europe, where there are fewer
independent complete seat suppliers, the segment primarily competes with
automotive manufacturers and three independent suppliers.
Roughly 60% of the automotive segment's sales over the last three
years were to the four major automobile manufacturers. Because of the
importance of new vehicle sales of major automotive manufacturers to its
operations, the segment is affected by general business conditions in this
industry. (See pages 20 - 21 of the company's 1995 Annual Report to
Shareholders.)
Controls Segment
The controls segment conducts much of its system installation
business and its facility management business through thousands of
individual contracts which are either negotiated or awarded on a competitive
basis. Key factors in awarding contracts include product and service
quality, price, reputation with respect to customer service, design,
application engineering capability and construction management expertise.
Although differences in corporate organization and product mix make
comparisons difficult, management believes that the controls segment's
domestic installed systems sales are approximately equal to those of its
next largest competitor. The integrated facility management services market
is highly fragmented, with no one company being dominant.
Sales of the segment's U.S. Federal Government facility operations
and maintenance services are largely dependent upon numerous individual
contracts with various departments and agencies of the U.S. Federal
Government. The controls and
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battery segments combined sales to the U.S. Federal Government accounted for
6% of the company's consolidated net sales in 1995, 9% in 1994 and 10% in
1993. The loss of all business with the U.S. Federal Government would,
therefore, have a material adverse effect on the company. However, the
likelihood of losing all business with the U.S. Federal Government is
remote, and the loss of any single contract with the U.S. Federal Government
would not have a material adverse effect on the company. Efforts by the
U.S. Federal Government to reduce spending have narrowed the scope of the
segment's activities at certain sites; however, increased U.S. Federal
Government outsourcing of facility operations and maintenance along with
increased expenditures for energy efficiency programs resulting from
increased Congressional funding and Presidential executive orders, have
created additional opportunities.
Plastics Segment
The plastic container business competes principally with four
domestic and two European independent suppliers. The segment competes
worldwide with approximately four domestic and five foreign companies in the
blowmolding machinery business. Quality, price and service are all key
competitive determinants to all of the segments operations.
Plastics segment sales are not dependent upon a single customer, or a
limited number of customers.
Battery Segment
Approximately 80% of the battery segment's total sales are to the
replacement market, with the remaining 20% to the original equipment market.
The segment is the principal supplier of automotive batteries to Interstate
Battery System of America ("Interstate") and AutoZone, and is a major
supplier of automotive batteries to Wal-Mart. Each of these customers sell
replacement batteries under their own brand labels. Original equipment and
replacement batteries are sold to a number of large manufacturers of motor
vehicles and heavy construction equipment. Replacement batteries are also
sold to battery distributors for resale to retail outlets.
Sales of the battery segment depend primarily on quality, price,
delivery and service, including marketing support and technical advice. The
segment primarily competes with three other battery manufacturers, one of
which is owned by a company having greater financial resources than Johnson
Controls.
Backlog
The company's backlog relates to the controls segment which derives a
significant portion of its revenues from long-term contracts which
are accounted for on the percentage-of-completion method. In accordance
with customary industry practice, the controls segment progress bills
customers on an estimated basis as work proceeds.
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Integrated facility management contracts generally contain yearly renewal
options; however, only the noncancellable portion of uncompleted contracts
which will be executed within the next fiscal year are reflected in the backlog
information below.
Information concerning contracts in progress for the controls segment is as
follows:
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September 30,
-------------------------
1995 1994
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(in millions)
<S> <C> <C>
Backlog of uncompleted building
systems and services contracts $1,872 $1,578
Earned revenues on uncompleted
building systems and services
contracts 1,135 941
------ ------
Unearned backlog of building systems
and services contracts 737 637
Unearned backlog of government
operations and maintenance
contracts 442 590
Unearned backlog of commercial
operations and maintenance
contracts 385 220
------ ------
Total unearned backlog of contracts $1,564 $1,447
====== ======
</TABLE>
Certain of the company's manufacturing businesses also accumulate backlog
data, but the amounts, when considered in the aggregate, are not significant to
an understanding of these businesses.
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Raw Materials
Raw materials used in the automotive segment such as steel, urethane
chemicals and chromium, were readily available during the year and such
availability is expected to continue. The controls segment is not dependent
upon any single source of supply for essential materials, parts or components.
Principal raw materials used in the manufacture of automotive batteries are
lead, antimony, calcium, sulfuric acid and polypropylene, all of which are
generally available in the open market. The supply of plastic resins used in
the plastics segment were also available during the year and such availability
is expected to continue.
Intellectual Property
Generally, statutory protection is sought for most intellectual property
embodied in patents, trademarks and copyrights. Some intellectual property,
where appropriate or possible, is protected by contract, license, agreement or
hold-in-confidence undertaking.
The company owns numerous U.S. and counterpart foreign patents, the more
important of which cover those technologies and inventions embodied in current
products, or which are used in the manufacture of those products. While the
company believes patents are important to its business operations and in the
aggregate constitute a valuable asset, no single patent, or group of patents,
is critical to the success of the business. The company, from time to time,
grants licenses under its patents and technology and receives licenses under
patents and technology of others.
The company has numerous registered trademarks in the U.S. and in many
foreign countries. The most important of these marks are "JOHNSON CONTROLS"
(including a stylized version thereof) and "JOHNSON". These marks are
universally used in connection with certain of its product lines and services.
The trademarks and servicemarks "ALLIANCE", "BIGFOOT", "PENN", "BASO",
"UNI-TRIM", "COUNTERLINE", "UNILOY-SPRINGFIELD", "METASYS", and "UNILOY" are
used in connection with certain company product lines and services. Original
equipment and replacement automotive batteries are sold carrying customer-owned
private labels and trademarks. The company also markets automotive batteries
under the licensed trademarks "EVEREADY" and "ENERGIZER". Industrial batteries
for original equipment and/or replacement usage are sold carrying either
company or customer-owned trademarks, including the company mark "DYNASTY".
Most works of authorship produced for the company, such as computer
programs, catalogs and sales literature, carry appropriate notices indicating
the company's claim to copyright protection under U.S. law and appropriate
international treaties.
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ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
The company's domestic operations are governed by a variety of laws intended
to protect the environment, principally the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), the Clean Water Act, the Clean Air Act and the state counterparts
of these laws (collectively, "Environmental Laws"), and bylaws addressing
workers' safety administered by both the Occupational Safety and Health
Administration and similar state agencies and federal and state laws regulating
health (collectively "Worker Safety Laws"). The Environmental Laws implemented
by the United States Environmental Protection Agency and state agencies govern
the generation and management of hazardous and toxic materials, the discharge
of pollutants into the air and into surface and underground waters, the
construction of new discharge sources, and environmental reporting and record
keeping, among other things. These laws govern ongoing operations, require
remediation of sites associated with past operations, and provide for civil and
criminal penalties and fines, as well as injunctive and remedial relief, for
noncompliance or cleanup.
The company's policy is to comply with applicable Environmental Laws and
Worker Safety Laws, and the company maintains procedures designed to foster and
ensure compliance. The company has expended substantial resources, both
financial and managerial, to ensure compliance with Environmental Laws and
Worker Safety Laws. Certain of the company's businesses are and have been
engaged in the handling or use of substances or compounds that may be
considered toxic or hazardous with the meaning of the Environmental Laws and
Worker Safety Laws. While this creates the risk of environmental liability
rising out of the company's operations and products, the company is committed
to protect the environment and comply with all such applicable laws utilizing
available technology.
The company's operations and facilities have been, and in the future may
become, the subject of formal or informal enforcement actions or
proceedings for noncompliance with such laws. Resolution of such
matters typically has been achieved by negotiation with the regulatory
authorities resulting in commitments to compliance or abatement programs and
payment of penalties. Historically, neither such commitments nor such
penalties have been material. (See Item 3 "Legal Proceedings" of this report
for a discussion of the company's potential environmental liabilities.)
Although the company believes that its operations are in substantial compliance
with such laws, there are no assurances that substantial additional costs for
compliance will not be incurred in the future.
Environmental Capital Expenditures
The company's ongoing environmental compliance program often results in
capital expenditures. While environmental considerations are a part of all
significant capital expenditures, in excess of $2 million of the company's
total capital expenditures in 1995 related solely to environmental compliance.
It is management's opinion that the amount of any future capital
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expenditures would not have a materially adverse effect on the company's
financial results or competitive position in any one year.
Employees
As of September 30, 1995, the company employed approximately
59,200 employees, of whom 39,500 were hourly and 19,700 were salaried.
Seasonal Factors
The business of the controls segment is executed on a relatively continuous
basis, thereby resulting in no significant fluctuation in employment levels or
revenues, on a percentage-of-completion basis, during the year.
The automotive replacement battery market is affected by weather patterns
because batteries are more likely to fail when extremely low temperatures place
substantial additional power requirements upon a vehicle's electrical system.
Also, battery life is shortened by extremely high temperatures which accelerate
corrosion rates. Therefore, either mild winter or moderate summer temperatures
may adversely affect automotive replacement battery sales.
Sales of batteries and seating to automobile manufacturers for
use as original equipment are dependent upon the demand for new automobiles.
Management believes that demand for new automobiles generally reflects
sensitivity to overall economic conditions with no material seasonal effect.
The plastics segment experiences some seasonality due to the peak demand for
beverage containers in the summer period.
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International Operations
The automotive segment has 38 wholly or majority-owned manufacturing
facilities located outside the U.S., including plants in Austria, Belgium,
Canada, Czech Republic, Germany, Mexico, Portugal, South Africa, Spain and the
United Kingdom. These facilities produce complete seats, metal seating
components, metal frames, seat covers or foam seating components, depending on
the location. The segment also has several partially-owned operations in
Europe which manufacture either complete seats, headliners and/or seating
components.
Through a number of foreign subsidiaries and branches, the controls segment
operates fully-staffed sales offices, offering engineering, installation and
service capabilities (the counterpart to the domestic controls operations) in
Australia, Austria, Belgium, Canada, China, Czech Republic, Denmark, France,
Germany, Hong Kong, Hungary, Italy, Malaysia, Mexico, The Netherlands, Norway,
Poland, Russia, Saudi Arabia, Singapore, Slovakia, South Africa, Spain, Sweden,
Switzerland, United Arab Emirates and the United Kingdom. The company acquired
a United Kingdom facility management services provider in 1994, and a contract
to operate six United Kingdom Atomic Energy Authority sites in 1995. In
addition, controls segment products are marketed through distributors
represented in approximately 40 countries. Products are manufactured in plants
located in China, Germany, Italy, Mexico, The Netherlands and the United
Kingdom, with the remainder of the product line supplied from the U.S. The
controls segment also has joint venture operations in the U.S., Brazil, China,
Italy, Japan, Malyasia, Singapore, and Thailand.
Battery manufacturing equipment, which incorporates the company's process
technology, is sold worldwide through the battery segment's international
operation. Licensing and joint venture arrangements are also in effect with
certain foreign manufacturers of batteries and automotive parts.
The plastics segment has two Italian manufacturers of continuous extrusion
blowmolding machinery and parts, one Belgian and one Italian manufacturer of
plastic containers and one Welsh manufacturer which supplies plastic preforms
to soft drink bottlers in the United Kingdom. The Italian plastic container
manufacturer is one of the largest manufacturers of PET plastic bottles in
Europe. Products from the Italian blowmolding machinery companies are also
marketed in the U.S. by the plastics segment's sales force. The company has a
majority interest in a French PET manufacturer which produces plastic preforms,
bottles and other containers. In 1995, the company acquired B&W
Kunststoffmaschinenbau Handelsgesellschaft mbH, a plastics machinery
manufacturer located in Germany and the Czech Republic.
The financial results of all foreign operations are subject to currency
exchange rate fluctuations. Gains and losses from the translation of most
foreign currency financial statements are accumulated as a separate component
of shareholders' equity. Net foreign currency transaction losses included in
miscellaneous expense were not significant in 1995, 1994 or 1993.
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Financial Information About Geographic Areas
Note 13 "Segment Information" of Notes to Consolidated Financial Statements
on page 38 of the 1995 Annual Report to Shareholders is incorporated herein by
reference.
Research and Development Expenditures
Expenditures for research activities relating to product development and
improvement are charged against income as incurred. Such expenditures amounted
to $137 million in 1995, $124 million in 1994 and $95 million in 1993. In
addition, the company expended $76 million in 1995, $53 million in 1994 and $58
million in 1993 for research activities sponsored by customers.
ITEM 2 PROPERTIES
The company has numerous manufacturing facilities located in the U.S.
Plants are also located in Austria, Belgium, Canada, Czech Republic, Germany,
France, Italy, Mexico, The Netherlands, Portugal, Spain and the United Kingdom.
The company considers its facilities to be suitable and adequate.
Substantially all of the company's facilities are operating at normal levels
based on capacity.
The principal manufacturing, administrative, and research and development
facilities listed on the following page by industry segment and location
aggregate approximately 19 million square feet of floor space and are owned by
the company except as noted on the following page. In addition, approximately
260 controls segment branch offices in major cities throughout the world are
either owned or leased. These offices vary in size in proportion to the volume
of business in the particular locality.
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<TABLE>
<CAPTION>
Controls Automotive
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<S> <C> <C>
Florida Cape Canaveral (2) California Livermore
Georgia Atlanta Modesto
Indiana Goshen Stockton (1)
Oklahoma Poteau Illinois Sycamore
Pennsylvania Pittsburgh (1) Indiana Greencastle (1)
Wisconsin Milwaukee Ossian
Watertown Vincennes (1)
Germany Essen (1) Kentucky Bardstown
Italy Lomagna Cadiz
Mexico Juarez Georgetown (1)
Reynosa Glasgow
The Netherlands Leeuwarden Harrodsburg
United Kingdom Bournemouth (1) Lemons Mill
Waterlooville (1) Maysville
Glasgow, Scotland Nicholasville
Shelbyville (1)
Plastics Louisiana Shreveport (1)
- - ----------------------------------------- Suwannee (1)
Alabama Tuscaloosa Maryland Belcamp (2)
California Los Angeles (1) North East (1)
Milpitas (1) Michigan Ann Arbor
Rancho Cucamonga (1) Lapeer
Colorado Denver Livonia (1)
Delaware New Castle Mt. Clemens (1)
Florida Orlando Plymouth (2)
Georgia Atlanta Saline
Illinois Itasca (1) Taylor (1)
Indiana Franklin Missouri Jefferson City
Kansas Lenexa (1) Kansas City (1)
Kentucky Nicholasville New Jersey Dayton (1)
Michigan Manchester (2) Ohio Greenfield
Novi (1) Strongsville (1)
Williamston (1) Pennsylvania Erie (1)
New Hampshire Merrimack (1) Tennessee Athens
New Jersey Pine Brook (1) Lexington
Somerville (1) Lewisburg (2)
Pennsylvania Erie Linden
South Carolina Columbia (1) Murfreesboro (2)
Texas Ft. Worth (1) Pulaski
Washington Tacoma (1) Virginia Chesapeake
Belgium Brecht (1) Austria Mandling
Czech Republic Palicka Boriny Belgium Geel
France Beaune (1) Canada Orangeville
Germany Berlin (1) Stratford
Italy Ascoli Tillsonburg
Florence Czech Republic Ceska Lipa
Milan Roundnice (1)
Mexico Mexico City (1) Straz Pod Ralskem
United Kingdom Banbury (1) Germany Bochum (1)
Mold, Wales (1) Espelkamp
Lahnwerk
Battery Opladen (1)
- - ------------------------------------- Radesomweld (1)
California Fullerton Remscheid (1)
Delaware Middletown Schwallbach (1)
Florida Tampa Sendiffinjer
Illinois Geneva Wermelskirchen (1)
Kentucky Florence (1) Zwickau
Louisville Mexico Juarez (2)
Missouri St. Joseph (1) Portugal Nelas
North Carolina Winston-Salem Portalegre
Ohio Toledo Spain Barcelona
Oregon Canby (Portland) Valencia
South Carolina Oconee Zaragoza
Wisconsin Milwaukee (2) South Africa Uitenhage (1)
Mexico Torreon United Kingdom Birmingham (1)
Essex (2)
Corporate Liverpool
- - ---------------------------------------- Mansfield
Wisconsin Milwaukee Silloth
Shropshire (2)
(1) Leased Staffordshire
(2) Both owned and leased facilities Wednesbury
</TABLE>
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ITEM 3 LEGAL PROCEEDINGS
Fire Retardant Treated Wood Litigation. As of September 28, 1983, Hoover
Universal, Inc. ("Hoover") sold the assets of its Wood Preserving Division to
Hoover Treated Wood Products, Inc. ("HTWP"), a subsidiary of Ply-Gem
Industries, Inc. ("PLY-GEM"). The agreement provided that Hoover retain
certain liabilities relating to that business including liability for products
shipped prior to October 1, 1983. One of the products of the Wood Preserving
Division was fire retardant treated wood. In May 1985, Hoover became a
subsidiary of the company.
The company and its subsidiary, Hoover, have received claims related to fire
retardant treated wood sold and used in a number of structures primarily in the
eastern half of the United States. These claims allege that the fire retardant
treated wood loses its structural integrity under some circumstances over time.
Plywood manufacturers, architects, wood treaters, builders, lumber suppliers,
chemical suppliers and others are also involved in these claims.
A mediation process that includes many of these parties and their insurers
is ongoing in New Jersey, where a number of these claims are located. The
efforts have been successful in resolving much of that litigation.
The company and its subsidiary are vigorously defending these claims and
have been successful on certain of their defenses asserted in these claims to
date. During 1993, the company entered into agreements with two insurance
carriers to provide a total of $65 million of insurance coverage on potential
fire retardant treated wood claims. With respect to the underlying claims, the
company's ultimate liability cannot be reasonably estimated at this time.
However, it is management's opinion that this matter will not have a materially
adverse effect on the company's financial position, results of operations or
cash flows.
In recent developments, the Pulte v. Hoover Treated Wood Products litigation
which involved a $23 million verdict against Hoover Treated Wood Products has
been resolved in a manner which will not require the payment of sums of money
by the company or subsidiaries in that litigation. Additionally, the dismissal
of claims against the company and Hoover in a class action filed in Maryland
has recently been affirmed by Maryland's highest court. In the opinion of
management, the balance of the litigation which currently exists or is
anticipated for the future is not anticipated to exceed the insurance coverage
structure which has been disclosed above.
Environmental Litigation and Proceedings. As noted previously, the
activities of the company are subject to various environmental laws and worker
safety laws. Liabilities potentially arise under these laws for any activities
which are not in compliance with such laws and for the cleanup of sites where
hazardous or toxic materials are present.
Regarding potential claims of noncompliance, the State of Ohio Environmental
Protection Agency has informed the company that it
15
<PAGE> 16
will seek civil penalties for alleged noncompliance with state laws governing
air permits and emissions at the company's Greenfield, Ohio plant. The
matter arose after the company learned of the possible deficiency while
preparing an air permit application, and voluntarily disclosed such information
to the state. The state issued a Notice of Violation on December 8, 1994, and
on December 5, 1995 proposed a penalty of $553,480. The company has not agreed
to pay the proposed penalty amount, and the parties continue to negotiate the
matter.
With respect to the cleanup of hazardous or toxic materials, the company's
activities have led to allegations that the company is responsible for
performing cleanups, or for the repayment of costs spent by governmental
entities or others performing cleanups at approximately 40 sites. Many of
these sites are landfills used by the company in the past for the disposal of
waste materials; others are secondary lead smelters and lead recycling sites
where the company returned lead-containing materials for recycling; a few
involve the cleanup of company manufacturing facilities; and the remaining fall
into miscellaneous categories. Furthermore, the company may face similar
claims of liability at additional sites in the future as a result of the
company's past or future operations.
Liability for investigation and remediation costs exists regardless of fault
or legality at the time of disposal, and it is joint and several, meaning that
any one of the companies responsible for disposing materials at the site may be
responsible for all of the cleanup expenses. Nevertheless, any responsible
party that has paid more than its fair share of site costs may recover fair
shares of its expenditures from other responsible parties. Thus, with respect
to many of the sites for which the company has potential liabilities, there are
other parties who the company believes will be required and have the ability to
bear a significant share of site cleanup costs. At any given site, the
liability and costs to be allocated among the parties depend on such factors as
the number of parties, the willingness of governmental agencies to contribute
public funds to the cleanup, the volume of material delivered to the site by
each party, the nature of each party's materials, the costs of the site cleanup
and the financial strength of the parties. Where the company is alleged to be
responsible for performing cleanup or for costs, it pursues a course of action
intended to mitigate its potential liabilities.
The company's policy is to accrue for potential environmental losses for
cleanup consistent with generally accepted accounting principles. In that
regard, the company accrues for potential environmental losses when it is
probable a loss has been incurred and the amount of the loss is reasonably
estimable. Its reserves for environmental related costs at the end of fiscal
year 1995 totalled $33 million. The company reviews the status of the sites on
a quarterly basis and adjusts its reserves accordingly. Such potential
liabilities accrued by the company are undiscounted and do not take into
consideration possible recoveries of future insurance proceeds. They do,
however, take into account the likely share other parties will bear at the
site. It is difficult to estimate the company's ultimate level of liability
for the
16
<PAGE> 17
sites due to the large number of other parties that may be involved,
the complexity of determining the relative liability among those parties, the
uncertainty as to the nature and scope of the investigations and remediation to
be conducted, uncertainty in the application of law and risk assessment, the
various choices and costs associated with diverse technologies that may be used
in corrective actions at the sites, and the often quite lengthy periods over
which eventual remediation may occur. Nevertheless, the company has no reason
to believe at the present time that any claims, penalties or costs in
connection with known environmental remediation matters will have a material
adverse effect on the company's financial position, results of operations or
cash flows.
This year, the company has modified its previous format of providing
detailed, case-specific information on a number of sites, and will be providing
such case-specific information only as to the matters set forth below. The
company believes this modification is appropriate because it has no reason to
believe at the present time that any of these matters (including the matters
discussed below) will likely have a material adverse effect on the company's
financial position, results of operations or cash flows. In addition, the
company believes the information contained in this Environmental Litigation and
Proceedings section, discussing all sites in the aggregate, provides
shareholders with sufficient information on these matters.
Typically, site remediation matters are addressed at the administrative
agency level of the government. Occasionally, however, litigation is
involved. The most significant such matters where litigation has been
commenced by the government or by private parties against the company are as
follows:
Gould, Inc. v. NL Industries, Inc., Case No. CV 91-1091 JE (United States
District Court for the District of Oregon), filed December , 1992.
Plaintiff is the owner of a site once used for secondary lead smelting. It
has sued certain site customers (including the company), the former owner
and several owners of adjacent properties seeking an allocation of cleanup
costs associated with the site among them. Plaintiff and many of the
defendants are performing work at the site pursuant to an administrative
order issued on January 23, 1992. Approximately $24 million has been
expended by the parties at the site, and the United States Environmental
Protection Agency (EPA) is determining what further work may be necessary to
complete site remediation.
United States v. NL Industries, Inc., Case No. 91-CV-00578-WDS (United
States District Court for the Southern District of Illinois), filed July 31,
1991. The EPA seeks to enforce an administrative order issued on November
27, 1990 against Johnson Controls and other defendants requiring performance
of a cleanup at a secondary smelter facility in Granite City, Illinois. The
company, the other defendants and the other parties to the 1990 order have
chosen not to perform on the basis that the administrative record of
decision underlying that order does not support the remedy the agency is
requiring. The complaint alleges that the defendants should pay penalties
(up to $25,000 per day and three times
17
<PAGE> 18
the cost of work the government performs) for failing to comply with the
order. It also alleges the company should be responsible for past
government expenditures, which currently total in excess of $10 million.
According to the agency, the remaining cleanup could cost in excess of $40
million.
Schuylkill Metals of Plant City, Inc. v. Johnson Controls, Inc., Case No.
95-610-CN-T-23B (United States District Court for the Middle District of
Florida), filed in April, 1995. The plaintiff is the owner of property once
used as a battery breaking facility. Plaintiff contends that the company
was a major customer and should pay an unspecified, equitable share of the
estimated $20 million the plaintiff expects to spend to clean up the site.
United States v. Johnson Controls, Inc., Case No. 93-335 (United District
Court for the District of Delaware), filed in July, 1993. The United States
alleged in its complaint that Johnson Controls should be responsible for $1.8
million of costs the government had incurred at the Wildcat Landfill
Superfund Site in Kent County, Delaware. The company has settled its
liability in this case for the amount of $172,500.
The company is also currently involved in litigation against its insurers to
recover cleanup costs and other damages for which it may be adjudged
responsible at many of the sites. The suit, Johnson Controls, Inc. v.
Employers Insurance of Wausau (Case No. 89-CV-016174), was filed in 1989 in
Milwaukee County Circuit Court. The company also filed a suit in New Jersey in
1995 against the same insurers alleging coverage for a site in New Jersey in
1995 against the same insurers alleging coverage for a site in New Jersey.
Johnson Controls, Inc. v. Employers Insurance of Wausau, (Docket No. L-223-95,
Superior Court, Middlesex County). The suits seek costs of defense and
indemnity payments under the policies and also declaratory judgments for future
costs. In 1994, the Wisconsin Supreme Court ruled that many types of cleanup
costs are not recoverable under common comprehensive general liability
insurance policies, such as those at issue in the company's cases. In 1995,
the Milwaukee County Circuit Court decided that the Supreme Court's ruling
applies to the company's case against its insurers and found for the insurers.
Similarly, the district court in New Jersey has very recently ruled that the
Wisconsin case is dispositive of the New Jersey case and found for the
insurers. The company is appealing the Milwaukee County Circuit Court
decision, but it has decided not to appeal the New Jersey decision.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of the fiscal year covered by this report.
18
<PAGE> 19
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction of G(3) of Form 10-K, the following list is
included as an unnumbered Item in Part I of this report in lieu of being
included in the company's Proxy Statement for its 1996 Annual Meeting of
Shareholders.
James H. Keyes, 55, was elected Chairman of the Board in January, 1993, and
Chief Executive Officer in 1988. He has served as President since 1986. Mr.
Keyes joined the company in 1966.
John M. Barth, 49, was elected an Executive Vice President in 1992, with
responsibility for the Automotive Systems Group, the Plastics Technology Group
and the Battery Group. Previously, he served as Vice President, Automotive
Systems Group, since 1990 and as Vice President, Plastics Technology Group,
since 1986. Mr. Barth joined the company in 1969.
Joseph W. Lewis, 60, was elected an Executive Vice President in 1992 and has
served as Vice President, Controls Group, since 1986. Mr. Lewis joined the
company in 1958.
Dr. Steven J. Bomba, 58, was elected Vice President, Corporate Technology in
1990. From 1987 to 1990 he was Vice President, Advanced Manufacturing
Technologies, for Rockwell International.
Susan F. Davis, 42, was elected Vice President, Human Resources, in April
1994. From August 1993, she served as Vice President of Organizational
Development for the Automotive Systems Group, the Plastics Technology Group and
the Battery Group. Ms. Davis joined the company in 1983.
Robert C. Dickhaus, 39, was elected Vice President and General Manager of
the Controls Group's Integrated Facility Management business in September 1995.
Mr. Dickhaus joined the company in 1991.
Giovanni (John) Fiori, 51, was elected a Corporate Vice President in 1992
and serves as Vice President and General Manager of the automotive seating
operations in Europe. Previously, he served as Vice President, Plastics
Technology Group. Mr. Fiori joined the company in 1987.
Michael F. Johnston, 48, was elected a Corporate Vice President in July
1993, and was named Vice President and General Manager, Battery Group, in
October 1993. Previously, he served as Vice President and General Manager of
the Battery Group's Starting, Lighting and Ignition Division since 1991 and as
Vice President and General Manager of the Battery Group's Specialty Battery
Division since 1989. Mr. Johnston joined the company in 1989.
John P. Kennedy, 52, was elected a Corporate Vice President in
1989 and has been Secretary since 1987 and General Counsel since 1984 when he
joined the company.
19
<PAGE> 20
William P. Killian, 60, was elected Vice President, Corporate Development
and Strategy in 1988, and served as Vice President, Corporate Development, from
1985 to 1988. Mr. Killian joined the company in 1977.
Charles G. McClure, 41, was elected a Corporate Vice President in June,
1993, and serves as Vice President and General Manager of the automotive
seating operations in North America. Previously he served as Vice President
and General Manager of the automotive seating operations in Europe. Mr.
McClure joined the company in 1983.
James H. Pell, 45, was elected Vice President and General Manager of the
Plastics Technology Group in June 1995. Prior to his current position, he
served as Vice President and General Manager of the Plastic Container Division
of the Plastics Technology Group. Mr. Pell joined the company in 1981.
Stephen A. Roell, 45, was elected Vice President and Chief Financial Officer
in 1991. Since 1990 he served as Corporate Controller and Assistant Secretary.
He served as Treasurer from 1987 to 1991. Mr. Roell joined the company in
1982.
Brian J. Stark, 46, was elected Vice President and General Manager of the
Controls Group's Systems and Services business in September 1995. Since
joining the company in 1971, Mr. Stark has served as a Branch and Regional
Manager within the Systems and Services field organization.
Denise M. Zutz, 44, was elected Vice President, Communication in 1991. She
previously served as Director of Corporate Communication and had served in
other communication positions since joining the company in 1973.
Ben C.M. Bastianen, 51, was named Treasurer in 1991. Between 1984 and 1990
he served as Assistant Treasurer, and then Treasurer, of Borg-Warner
Corporation.
Franklin H. Smith, Jr., 44, was named Controller of the Controls Group,
effective October, 1995. Between 1991 and 1995, he served as Corporate
Controller, and from 1987 to 1991 he served as Director of Taxes for the
company. Mr. Smith joined the company in 1987.
Jerome D. Okarma, 43, was elected Assistant Secretary in 1990. He has
served as Assistant General Counsel since joining the company in 1989 and as
Vice President and General Counsel of the Controls Group and Vice President and
General Counsel of the Battery Group since 1993. Mr. Okarma previously served
as Assistant Secretary and Senior Attorney for Borg-Warner Corporation.
Michael P. O'Rourke, 41, was elected Assistant Secretary in January 1994.
He has served as Vice President and General Counsel of the Plastics Technology
Group since 1993 and was Vice President of Administration and Law for the
Automotive Systems Group since 1991. Mr. O'Rourke joined the company in 1983.
20
<PAGE> 21
There are no family relationships, as defined by the instructions to this
item, between the above executive officers.
All officers are elected for terms which expire on the date of the meeting
of the Board of Directors following the Annual Meeting of Shareholders or until
their successors are elected and qualified.
PART II
The information required by Part II, Items 5 through 8, is incorporated
herein by reference to the company's 1995 Annual Report to Shareholders as
follows:
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS - See price range and dividend information on page 22, and
Note 7 "Shareholders' Equity" on page 34 of Notes to Consolidated
Financial Statements of the 1995 Annual Report to Shareholders.
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of December 1, 1995
-------------- ---------------------
<S> <C>
Common Stock, $.16-2/3 par value 38,613
</TABLE>
ITEM 6 SELECTED FINANCIAL DATA - See "Five Year Summary" on page 40 of the
1995 Annual Report to Shareholders.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - See pages 20 through 26 of the 1995 Annual
Report to Shareholders.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - See pages 27 through 39
of the 1995 Annual Report to Shareholders.
ITEM 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
21
<PAGE> 22
PART III
All information required by Items 10 through 13 of Part III, with the
exception of information on the Executive Officers which appears on pages 19-21
of Part I of this report, is incorporated by reference to pages 1-16 of the
company's Proxy Statement for its 1996 Annual Meeting of Shareholders.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Page in
Annual Report*
<S> <C>
(a) The following documents are filed as part
of this report:
(1) Financial Statements
Consolidated Statement of Income
for the years ended September 30,
1995, 1994 and 1993 .................... 27
Consolidated Statement of Financial
Position at September 30, 1995
and 1994................................ 28
Consolidated Statement of Cash Flows
for the years ended September 30, 1995,
1994 and 1993........................... 29
Consolidated Statement of Shareholders'
Equity for the years ended September 30,
1995, 1994 and 1993..................... 30
Notes to Consolidated Financial
Statements.............................. 31-38
Report of Independent Accountants......... 39
</TABLE>
*Incorporated by reference from the indicated pages of the 1995 Annual
Report to Shareholders.
22
<PAGE> 23
<TABLE>
<CAPTION>
Page in
Form 10-K
---------
<S> <C>
(2) Financial Statement Schedules
Report of Independent Accountants on
Financial Statement Schedules........... 28
For the years ended September 30,
1995, 1994 and 1993:
II. Valuation and Qualifying Accounts.. 30
</TABLE>
All other schedules are omitted because they are not applicable, or
the required information is shown in the financial statements or notes
thereto.
Financial statements of 50% or less-owned companies have been omitted
because the proportionate share of their profit before income taxes and
total assets are less than 20% of the respective consolidated amounts, and
investments in such companies are less than 20% of consolidated total
assets.
(3) EXHIBITS
<TABLE>
<S> <C>
3.(i) Restated Articles of Incorporation of Johnson Controls, Inc. (incorporated by reference to Exhibit 3.A
to Johnson Controls, Inc. Annual Report on Form 10-K for the year ended September 30, 1987).
3.(ii) By-laws of Johnson Controls, Inc., as amended November 16, 1994 (incorporated by reference to Exhibit
3.(ii) to Johnson Controls, Inc. Annual Report on Form 10-K for the year ended September 30, 1994).
4.A Miscellaneous long-term debt agreements and financing leases with banks and other creditors and
debenture indentures.*
4.B Miscellaneous industrial development bond long-term debt issues and related loan agreements and leases.*
4.C Rights Agreement between Johnson Controls, Inc. and Firstar Trust Company (Rights Agent) as amended
November 16, 1994 (incorporated by reference to Exhibit 4.C to Johnson Controls, Inc. Annual Report on
Form 10-K for the year ended September 30, 1994).
</TABLE>
23
<PAGE> 24
(3) EXHIBITS (Continued)
<TABLE>
<S> <C>
4.D Certificate of the Relative Rights and Preferences of the Series D Convertible Preferred Stock of Johnson
Controls, Inc. (incorporated by reference to an exhibit to the Form 8-K dated May 26, 1989).
4.E Note and Guaranty Agreement dated June 19, 1989 between Johnson Controls, Inc., as Guarantor, and Johnson
Controls, Inc. Employee Stock Ownership Trust, acting by and through LaSalle National Bank, as trustee, as
issuer (incorporated by reference to Exhibit 4.E to Johnson Controls, Inc. Annual Report on Form 10-K for the
year ended September 30, 1990).
4.F Letter of agreement dated December 6, 1990 between Johnson Controls, Inc., LaSalle National Trust, N.A. and
Fidelity Management Trust Company which replaces LaSalle National Trust, N.A. as Trustee of the Johnson
Controls, Inc. Employee Stock Ownership Plan Trust with Fidelity Management Trust Company as Successor Trustee,
effective January 1, 1991 (incorporated by reference to Exhibit 4.F to Johnson Controls, Inc. Annual Report on
Form 10-K for the year ended September 30, 1991).
4.G Indenture for debt securities dated February 22, 1995 between Johnson Controls, Inc. and Chemical Bank Delaware,
trustee (Incorporated by reference to the Form S-3 filed February 13, 1995, which became effective February 17,
1995).
10.A Johnson Controls, Inc., 1992 Stock Option Plan as amended through September 22, 1993 (Incorporated by reference
to Exhibit 10.A to Johnson Controls, Inc. Annual Report on Form 10-K for the year ended September 30, 1993).
10.B Johnson Controls, Inc., 1984 Stock Option Plan as amended through September 22, 1993 (Incorporated by reference
to Exhibit 10.B to Johnson Controls, Inc. Annual Report on Form 10-K for the year ended September 30, 1993).
10.C Johnson Controls, Inc., 1992 Stock Plan for Outside Directors, (incorporated by reference to Exhibit 10.D to
Johnson Controls, Inc. Annual Report on Form 10-K for the year ended September 30, 1992).
</TABLE>
24
<PAGE> 25
(3) EXHIBITS (Continued)
<TABLE>
<S> <C>
10.D Johnson Controls, Inc., Deferred Compensation Plan for Certain Directors as amended through September 25, 1991
(incorporated by reference to Exhibit 10.C to Johnson Controls, Inc. Annual Report on Form 10-K for the year
ended September 30, 1991).
10.E Johnson Controls, Inc., Directors Retirement Plan as amended through July 26, 1989 (incorporated by reference to
Exhibit 10.D to Johnson Controls, Inc. Annual Report on Form 10-K for the year ended September 30, 1989).
10.F Johnson Controls, Inc., Executive Incentive Compensation Plan Deferred Option as amended March 21, 1995, filed
herewith.
10.G Johnson Controls, Inc., Executive Incentive Compensation Plan as amended through September 22, 1993,
(incorporated by reference to Exhibit 10.H to Johnson Controls, Inc. Annual Report on Form 10-K for the year
ended September 30, 1993).
10.H Johnson Controls, Inc., Executive Incentive Compensation Plan, Deferred Option, Qualified Plan effective
September 28, 1994, (incorporated by reference to Exhibit 10.I to Johnson Controls, Inc. Annual Report on Form
10-K for the year ended September 30, 1994).
10.I Johnson Controls, Inc., Long-Term Performance Plan, as amended through September 28, 1994, (incorporated by
reference to Exhibit 10.J to Johnson Controls, Inc. Annual Report on Form 10-K for the year ended September 30,
1994).
10.J Johnson Controls, Inc., Executive Survivor Benefits Plan, as amended through January 1, 1989, (incorporated by
reference to Exhibit 10.K to Johnson Controls, Inc. Annual Report on Form 10-K for the year ended September 30,
1994).
10.K Form of employment agreement as amended through October 1, 1991 between Johnson Controls, Inc. and Messrs. Barth,
Kennedy, Keyes, Lewis and Roell, (incorporated by reference to Exhibit 10.K to Johnson Controls, Inc. Annual
Report on Form 10-K for the year ended September 30, 1992).
</TABLE>
25
<PAGE> 26
(3) EXHIBITS (Continued)
<TABLE>
<S> <C>
10.L Form of indemnity agreement, as amended, between Johnson Controls, Inc. and Messrs. Barth, Kennedy, Keyes,
Lewis and Roell, (incorporated by reference to Exhibit 10.K to Johnson Controls, Inc. Annual Report on Form
10-K for the year ended September 30, 1991).
11 Statement regarding computation of earnings per share for the years ended September 30, 1995, 1994 and 1993,
filed herewith.
12 Statement regarding computation of ratio of earnings to fixed charges for the year ended September 30, 1995,
filed herewith.
13 1995 Annual Report to Shareholders, filed herewith.
21 Subsidiaries of the Registrant, filed herewith.
23 Consent of Independent Accountants dated December 20, 1995, filed herewith.
27 Financial Data Schedule (electric filing only).
99 Proxy Statement for Annual Meeting of Shareholders of Johnson Controls, Inc., to be held January 24, 1996, filed
herewith.
</TABLE>
*These instruments are not being filed as exhibits herewith
because none of the long-term debt instruments authorizes the
issuance of debt in excess of ten percent of the total assets of
Johnson Controls, Inc., and its subsidiaries on a consolidated
basis. Johnson Controls, Inc. agrees to furnish a copy of each
such agreement to the Securities and Exchange Commission upon
request.
(b) A Form 8-K Current Report was filed on December 7, 1995 to facilitate
the Company's issuance of $125 million of 6.95% debentures.
Other Matters
For the purposes of complying with the amendments to the rules governing
Form S-8 under the Securities Act of 1933, the undersigned registrant hereby
undertakes as follows, which undertaking shall be incorporated by reference
into registrant's Registration Statements on Form S-8 Nos. 33-30309, 33-31271,
33-58092, 33-58094 and 33-49862.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and
26
<PAGE> 27
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
27
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Directors and Shareholders
of Johnson Controls, Inc.
Our audits of the consolidated financial statements referred to in our report
dated October 23, 1995 appearing on page 39 of the 1995 Annual Report to
Shareholders of Johnson Controls, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules listed in Item
14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules
present fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
As discussed in the Notes to Consolidated Financial Statements appearing on
pages 31 to 38 of the 1995 Annual Report to Shareholders of Johnson Controls,
Inc., the Company changed its method of accounting for postretirement benefits
other than pensions, postemployment benefits and income taxes effective October
1, 1992.
PRICE WATERHOUSE, LLP
Milwaukee, Wisconsin
October 23, 1995
28
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
JOHNSON CONTROLS, INC.
BY Stephen A. Roell,
Vice President and
Chief Financial Officer
Date: December 20, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below as of December 20, 1995, by the following persons
on behalf of the registrant and in the capacities indicated:
James H. Keyes, Chairman and Stephen A. Roell,
Chief Executive Officer Vice President and Chief
Financial Officer
Franklin H. Smith, Jr.
Corporate Controller
Gilbert R. Whitaker, Jr. Paul A. Brunner
Director Director
Robert L. Barnett Willie D. Davis
Director Director
R. Douglas Ziegler Fred L. Brengel
Director Director
29
<PAGE> 30
JOHNSON CONTROLS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in millions)
<TABLE>
<CAPTION>
Year Ended September 30, 1995 1994 1993
-------------------------------------------
<S> <C> <C> <C>
Accounts Receivable - Allowance for Doubtful Accounts
Balance at beginning of period $23.4 $17.2 $12.5
Provision charged to costs and expenses 5.7 9.6 9.3
Acquisition of businesses 0.0 0.7 0.2
Recoveries on accounts previously charged off (0.4) (0.8) 0.2
Currency translation 0.5 0.6 (1.3)
Accounts charged off (6.4) (3.8) (4.6)
Other (0.6) (0.1) 0.9
-------------------------------------------
Balance at end of period $22.2 $23.4 $17.2
===========================================
Deferred Tax Assets - Valuation Allowance
Balance at beginning of period $27.0 $11.2 $ --
Establishment of SFAS No. 109
valuation allowance -- -- 11.2
Allowance established for new
loss carryforwards and tax credits 8.5 18.0 --
Allowance reversed for loss
carryforwards utilized (3.7) (2.2) --
-------------------------------------------
Balance at end of period $31.8 $27.0 $11.2
===========================================
</TABLE>
30
<PAGE> 31
JOHNSON CONTROLS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS TITLE PAGE
- - -------- --------------------------------------------- ----
<S> <C> <C>
3.(i) Restated Articles of Incorporation of
Johnson Controls, Inc. (incorporated by
reference to Exhibit 3.A to Johnson
Controls, Inc. Annual Report on Form 10-K
for the year ended September 30, 1987).
3.(ii) By-laws of Johnson Controls, Inc., as
amended November 16, 1994, (incorporated
by reference to Exhibit 3.(ii) to Johnson
Controls, Inc. Annual Report on Form 10-K
for the year ended September 30, 1994).
4.A Miscellaneous long-term debt agreements
and financing leases with banks and
other creditors and debenture indentures.*
4.B Miscellaneous industrial development bond
long-term debt issues and related loan agreements
and leases.*
4.C Rights Agreement between Johnson Controls,
Inc. and Firstar Trust Company
(Rights Agent), as amended November 16,
1994, (incorporate by reference to Exhibit
4.C to Johnson Controls, Inc. Annual Report
on Form 10-K for the year ended September 30,
1994).
4.D Certificate of the Relative Rights and
Preferences of the Series D Convertible
Preferred Stock of Johnson Controls, Inc.
(incorporated by reference to an exhibit
to the Form 8-K dated May 26, 1989).
4.E Note and Guaranty Agreement dated June 19,
1989 between Johnson Controls, Inc., as
Guarantor, and Johnson Controls, Inc.
Employee Stock Ownership Trust, acting by
and through Lasalle National Bank, as
trustee, as issuer, (Incorporated by
reference to Exhibit 4.E to Johnson Controls,
Inc. Annual Report on Form 10-K for the year
ended September 30, 1990).
</TABLE>
31
<PAGE> 32
JOHNSON CONTROLS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS TITLE PAGE
- - -------- --------------------------------------------- ----
<S> <C> <C>
4.F Letter of agreement dated December 6, 1990
between Johnson Controls, Inc., LaSalle
National Trust, N.A. and Fidelity Management
Trust Company which replaces LaSalle National
Trust, N.A. as Trustee of the Johnson Controls,
Inc. Employee Stock Ownership Plan Trust
with Fidelity Management Trust Company as
Successor Trustee, effective January 1, 1991
(incorporated by reference to Exhibit 4.F to Johnson
Controls, Inc. Annual Report on Form 10-K for the
year ended September 30, 1991).
4.G Indenture for debt securities dated
September 1, 1989 between Johnson Controls,
Inc. and Chemical Bank Delaware, trustee
(incorporated by reference to the Form S-3
dated September 20, 1989).
10.A Johnson Controls, Inc., 1992 Stock Option
Plan as amended through September 22, 1993
(incorporated by reference to Exhibit 10.A
to Johnson Controls, Inc. Annual Report on
Form 10-K for the year ended September 30,
1993).
10.B Johnson Controls, Inc., 1984 Stock Option
Plan as amended through September 22, 1993
(incorporated by reference to Exhibit 10.B
to Johnson Controls, Inc. Annual Report on
Form 10-K for the year ended September 30,
1993).
10.C Johnson Controls, Inc., 1982 Stock Option
Plan as amended through May 24, 1989
(incorporated by reference to Exhibit 10.B
to Johnson Controls, Inc. Annual Report on
Form 10-K for the year ended September 30, 1989).
10.D Johnson Controls, Inc., 1992 Stock Plan for
Outside Directors, (incorporated by reference
to Exhibit 10.D to Johnson Controls, Inc.
Annual Report on Form 10-K for the year ended
September 30, 1992).
10.E Johnson Controls, Inc., Deferred Compensation
Plan for Certain Directors as amended through
September 25, 1991 (incorporated by reference
to Exhibit 10.C to Johnson Controls, Inc. Annual
Report on Form 10-K for the year ended September 30,
1991).
</TABLE>
32
<PAGE> 33
JOHNSON CONTROLS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS TITLE PAGE
- - -------- --------------------------------------------- ----
<S> <C> <C>
10.F Johnson Controls, Inc., Directors Retirement
Plan as amended through July 26, 1989
(incorporated by reference to Exhibit 10.D
to Johnson Controls, Inc. Annual Report on
Form 10-K for the year ended September 30,
1989).
10.G Johnson Controls, Inc., Executive Incentive
Compensation Plan Deferred Option as amended
March 21, 1995, filed herewith. 35-51
10.H Johnson Controls, Inc., Executive Incentive
Compensation Plan as amended through September
22, 1993 (incorporated by reference to
Exhibit 10.H to Johnson Controls, Inc. Annual
Report on Form 10-K for the year ended
September 30, 1993).
10.I Johnson Controls, Inc., Executive Incentive
Compensation Plan, Deferred Option, Qualified
Plan effective September 28, 1994, (incorporated
by reference to Exhibit 10.I to Johnson Controls,
Inc. Annual Report on Form 10-K for the year
ended September 30, 1994).
10.J Johnson Controls, Inc., Long-Term Performance
Plan as amended through September 28, 1994,
(incorporated by reference to Exhibit 10.J to
Johnson Controls, Inc. Annual Report on Form
10-K for the year ended September 30, 1994).
10.K Johnson Controls, Inc., Executive Survivor
Benefits Plan amended through January 1, 1989,
(incorporated by reference to Exhibit 10.K to
Johnson Controls, Inc. Annual Report on Form
10-K for the year ended September 30, 1994).
10.L Form of employment agreement, as amended
through October 1, 1991, between Johnson
Controls, Inc. and Messrs. Barth, Kennedy,
Keyes, Lewis and Roell, (incorporated by
reference to Exhibit 10.K to Johnson
Controls, Inc. Annual Report on Form 10-K
for the year ended September 30, 1992).
10.M Form of indemnity agreement, as amended,
between Johnson Controls, Inc. and Messrs.
Barth, Kennedy, Keyes, Lewis and Roell,
(incorporated by reference to Exhibit 10.K
to Johnson Controls, Inc. Annual Report on
Form 10-K for the year ended September 30,
1991).
</TABLE>
33
<PAGE> 34
JOHNSON CONTROLS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS TITLE PAGE
- - -------- --------------------------------------------- ----
<S> <C> <C>
11 Statement regarding computation of earnings
per share for the years ended September 30,
1995, 1994 and 1993, filed herewith. 52
12 Statement regarding computation of ratio of
earnings to fixed charges for the year ended
September 30, 1995, filed herewith. 53
13 1995 Annual Report to Shareholders, filed
herewith. 54-97
21 Subsidiaries of the Registrant, filed
herewith. 98-106
23 Consent of Independent Accountants dated
December 20, 1995, filed herewith. 107
27 Financial Data Schedule, (electronic
filing only.)
99 Proxy Statement for Annual Meeting of
Shareholders of Johnson Controls, Inc.,
to be held January 24, 1996, filed herewith. 108-146
</TABLE>
*These instruments are not being filed as exhibits herewith
because none of the long-term debt instruments authorizes
the issuance of debt in excess of ten percent of the total assets
of Johnson Controls, Inc., and its subsidiaries on a
consolidated basis. Johnson Controls, Inc. agrees to furnish a
copy of each such agreement to the Securities and Exchange
Commission upon request.
34
<PAGE> 1
EXHIBIT 10.G
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
1. NAME
Johnson Controls Executive Incentive Compensation Plan.
2. PURPOSE
The purpose of the Plan is to:
Provide incentive to the key executives of the Company and its
subsidiaries who have the prime responsibility for the operations of
the Company and its subsidiaries by making them participants in their
success.
3. DEFINITIONS
A. The term "Company" means Johnson Controls, Inc., a Wisconsin
Corporation, and any successor thereto that adopts the Plan.
B. The term "Plan" means the arrangement described herein.
C. The term "Plan Year" means a fiscal year of the Company.
D. The term "Participant" means an executive of the Company or a
subsidiary who has been approved for participation in the Plan.
E. The term "Board" means the Board of Directors of the Company.
F. The term "Committee" means a committee of the Board, which
shall consist of not less than two (2) members of the Board
each of whom is a "disinterested person" as defined in
Securities and Exchange Commission Rule 16b-3(c)(2)(i), or as
such term may be defined in any successor regulation under
Section 16 of the Securities Exchange Act of 1934, as amended.
G. The term "Compensation" means the annualized base salary at
the close of the fiscal year, including salary being paid on
a deferred basis as well as salary being paid on a current
basis.
35
<PAGE> 2
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
H. The term "Beneficiary" means the person or persons entitled to
receive the interest of a Participant in the event of the
Participant's death.
I. The term "Operating Profits" means the consolidated income
before:
(1) The incentive compensation awards under this Plan.
(2) Any taxes on income.
(3) Extraordinary credits and charges to income less the
related tax effect.
(4) The cumulative effect, less the related tax effect,
on prior years of any accounting change made during
the year.
(5) Company contribution to Savings & Investment Plan.
The calculation of such Operating Profits shall be examined by
the Company's independent public accountants who shall
furnish their opinion that such calculation has been made in
accordance with generally accepted accounting principles
consistently applied and in compliance with the provisions of
this Plan.
J. The term "Shareholders' Equity" for a Plan Year means the
consolidated shareholders' equity (sometimes referred to as
net worth) of the Company at the end of the preceding fiscal
year of the Company, as set forth in the Company's annual
report for the preceding fiscal year, plus or minus a
proportionate allowance for any change during such Plan Year,
based on the period of such change, in the amount of
shareholders' equity from newly-issued or finally-retired
capital stock.
K. For the purposes of this Agreement, business combinations
treated as an accounting pooling of interests shall be
adjusted to a purchase basis and Operating Profits and
Shareholders' Equity shall be restated accordingly.
L. The term "Return on Shareholders' Equity" for a Plan Year
means the percentage that Operating Profits for the year is
of Shareholders' Equity for the year.
36
<PAGE> 3
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
M. The term division "Return on Assets" for a Plan Year means
division operating income for the year as a percentage of
average division assets employed. (See Corporate Procedure
Number 3A 3580 01).
4. ELIGIBILITY AND PARTICIPATION
A. APPROVAL
Each executive of the Company or a subsidiary who is approved
for participation in the Plan by the Committee shall be a
Participant as of the date designated by the Committee.
Written notice of such approval shall be given to each
executive so approved as soon as practicable following date of
approval.
B. TERMINATION OF APPROVAL
The Committee may withdraw its approval for participation for
a Participant at any time. In the event of such withdrawal,
the executive concerned shall cease to be an active
Participant as of the date selected by the Committee and the
executive shall be notified of such withdrawal as soon as
practicable following such action.
C. NOTIFICATION
In general, it is expected that executives who are to be
Participants for a Plan Year shall be notified of that fact
before the beginning of the Plan Year.
D. TRANSFERS IN, OUT OF AND BETWEEN ELIGIBLE POSITIONS
(1) It is contemplated that an executive may be approved
for participation during a portion of a Plan Year and
shall be eligible to receive an award for the year
based on the number of full months as a Participant.
a. A person newly hired or transferred into an
eligible position shall have his/her participation
prorated during the first Plan
37
<PAGE> 4
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
Year provided employment or transfer occurs
at least two months prior to the end of the
Plan year.
b. A person transferred out of an eligible
position may receive a prorated award at the
discretion of the Committee provided he/she
served in the eligible position for at least
two full months during the Plan Year.
(2) Participants transferring between eligible positions
having different award formulae will receive awards
prorated to months served in each eligible position.
E. TERMINATION OF EMPLOYMENT
No incentive award shall be made for a Plan Year for a Participant
whose employment with the Company or subsidiary is terminated
during the year for reasons other than retirement due to age
under the Company's or subsidiary's retirement program, total and
permanent disability, or death, unless approved by the Committee
after considering the cause of termination.
5. ANNUAL AWARDS TO PARTICIPANTS
A. AWARDS BASED ON FORMULA
As of the end of each Plan Year, a formula award shall be
determined for each Participant who is eligible to receive an
award for the year. The award shall be expressed as a
percentage of Compensation resulting from a formula which is
communicated individually.
B. DISCRETIONARY ADJUSTMENTS TO FORMULA AWARDS
Upon recommendation by the President, the Committee may
approve adjustments to a Participant's formula award based
upon the individual's performance and attainment of objectives
during the Plan Year. Awards may be increased up to a maximum
of 1.5 times the formula percentage yield in instances of
outstanding performance and reduced to no less than .8 times
the formula percentage yield in instances of marginal
performance.
38
<PAGE> 5
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
6. PAYMENT OF INCENTIVE AWARDS
A. CURRENT PAYMENT
A Participant's award for a Plan Year, which is not deferred
in accordance with the provisions of Item 6.B. hereof, and a
Participant's award, whether or not he elected deferred payment
thereof, for the Plan Year in which his employment terminates,
shall be paid in cash to the Participant, or his Beneficiary in
the event of his death, during the first quarter following the
end of the Plan Year.
B. DEFERRED PAYMENT
(1) ELECTION
Before the first day of each Plan Year, a
Participant may irrevocably elect in writing to have a
part or all of his award for the year under the Plan
(but not less than $1,000) deferred and, at his
election, part or all such deferred payment may be
converted to Share Units, as provided below, and
credited to a bookkeeping reserve account which shall
be established for the Participant and set up on the
books of the Company and known as his "Share Unit
Account", and/or the dollar amount of part or all of
such deferred payment may be credited to a bookkeeping
reserve account which shall be established for the
Participant and set up on the books of the Company and
known as his "Interest Account" and/or the dollar
amount of part or all of such deferred payment may be
credited to a bookkeeping reserve account which shall
be established for the Participant and set up on the
books of the Company and known as his "Equity Fund
Account." The term "Share Unit" means a measure of
participation under the Plan having a value based on
the market value of a share of the common stock of the
Company and other characteristics specified herein.
Any other provision of this Plan to the contrary
notwithstanding, the aggregate number of Share Units
to be awarded under this Plan shall not exceed two (2)
percent of the number of issued and outstanding shares
of the Company's Common Stock. Subject to limitation,
a Participant may also irrevocably elect, once each
year and effective on the next date
39
<PAGE> 6
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFERRED OPTION
MARCH 21, 1995
on which conversions are made under Item 6.B(2), to
convert all or part of an Interest Account or an
Equity Fund Account to the Participant's Share Unit
Account. Such conversions shall be made in the same
manner as set forth in Item 6.B(2), as if the
amount for which an election was made was an award
being made effective on that date.
(2) CONVERTING AWARDS TO SHARE UNITS
When a Participant has elected to have a part or all
of his award under the Plan converted to Share Units,
it shall be converted as of the same date on which
cash payments are made or would have been made. Each
award shall be converted into Share Units in the
following manner:
a. Determine the market value of a share of the
common stock of the Company.
b. Divide the award by such market value.
c. The quotient resulting from such division
indicates the Share Units to be credited.
(3) CONVERTING DIVIDEND AWARDS TO SHARE UNITS
Whenever the Company declares a dividend on its Common
Stock, in cash or in property, at a time when
Participants have Share Units credited to their
accounts in the Plan, a dividend award shall be made
to all Participants as of the date of payment of the
dividend. The dividend award for a Participant shall
be determined by multiplying the Share Units credited
to a Participant's account on the date of payment by
the amount of the dividend paid on each share of
common stock. The dividend award shall be converted
into Share Units in the same manner that an award is
converted into Share Units under Item 6.B.(2). In
making this conversion, the market value of a share
of the common stock of the Company shall be
determined as of the date the dividend on the common
stock is paid. Any other provision of this Plan to
the contrary notwithstanding, if a dividend is
declared on the
40
<PAGE> 7
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
common stock of the Company in the form of a right
or rights to purchase shares of capital stock of the
Company or of any entity acquiring the Company, such
dividend award shall not be converted to Share Units,
but each Share Unit credited to a Participant's
Share Unit Account at the time such dividend is paid
and each Share Unit thereafter credited to the
Participants's Share Unit Account at a time when such
rights are attached to shares of the Company's common
stock shall thereafter be valued as of any point in
time on the basis of the aggregate of the then market
value of one share of the common stock of the Company
plus the then market value of such right or rights
then or previously attached to one share of the
common stock of the Company.
(4) ADJUSTMENTS
In the event of a stock dividend on the common stock
of the Company, or any split up or combination of
shares of the common stock of the Company, or other
change therein, an appropriate adjustment shall be
made in the aggregate number of Share Units then
standing to the credit of a Participant so as to
give effect to the extent practicable to such change
in the capital structure of the Company and to the
purpose and intent of the Plan.
(5) CREDITS TO INTEREST ACCOUNT
When a Participant has elected to have a part or all
of his award credited to an "Interest Account", the
unpaid balance in such account shall be credited with
a simple annual interest equivalent, as follows: As of
the January 1 next following the Plan Year for which
the deferred award was made such award shall become
part of the unpaid balance of such Interest Account.
Such Interest Account shall be credited on
December 31 of each year with an amount equal to
interest on the unpaid balance of such account from
time to time outstanding during the year ending on
such December 31 at the rate determined by adding
together the prime rate in effect at the First
Wisconsin National Bank of Milwaukee on the last
banking day prior to the beginning of such year and
the prime rate in effect at said bank on the last
banking days of each of the calendar months of
January
41
<PAGE> 8
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
through November of such year and dividing
such total by 12. In the event that the Interest
Account shall be terminated for any reason prior to
December 31 of any year, such account shall upon such
termination date be credited with an amount equal to
interest at the average prime rate determined as
aforesaid on the unpaid balance from time to time
outstanding during that portion of such year prior to
the date of termination.
(6) CREDITS TO EQUITY FUND ACCOUNT
When a Participant has elected to have a part or all
of his award credited to an "Equity Fund Account"
the unpaid balance in such account shall be credited
or debited, with an annual investment return
equivalent as follows: As of the day next following
the close of each Plan Year for which an award was
made, such award shall become part of the unpaid
balance of such Equity Fund Account. Such Equity
Fund Account shall be treated as if it had been
invested as an integral part of the Equity Fund
under the Johnson Controls Savings and Investment
Plan and shall be credited or debited as of the last
day of each Plan Year with an amount equal to the
net gain or loss in value, as the case may be, which
would have been realized on an amount equal to the
unpaid balance of such Equity Fund Account if it had
been invested in such Equity Fund throughout such
Plan Year. In the event that the Equity Fund
Account shall be terminated for any reason prior to
September 30 of any year, such account shall upon
such termination date be credited or debited with an
amount equal to the net gain or loss in value which
would have been realized on an amount equal to the
unpaid balance of such Equity Fund Account if it had
been invested in such Equity Fund during the part of
such Plan Year commencing on the first day thereof
and ending on the date of termination of such
account.
(7) DISTRIBUTION UPON TERMINATION OF EMPLOYMENT
Upon termination of a Participant's employment with
the Company or subsidiary for any reason, the
Participant, or his/her Beneficiary in the event of
his/her death, shall be entitled to ten approximately
equal annual installment payments. The amount
accumulated in such
42
<PAGE> 9
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
Participant's Interest Account, Share Unit Account
and/or Equity Fund Account, as the case may be, shall be
distributed as hereinafter provided.
a. If the Participant elects the Interest
Account and/or Equity Fund Account, the amount, if
any, shall be paid in cash as follows:
i. The first annual payment shall be made
during the first quarter of the calendar year
following the date of termination of
employment, and shall be in an amount equal
to the value of 1/10th of the total amount
credited to the Participant's Interest
Account and/or Equity Fund Account as of
January 1 next following date of termination.
ii. A second annual payment shall be made during
the first quarter of the calendar year
following the year during which the first
anniversary of the date of termination of
employment occurs, and shall be in an amount
equal to the value of 1/9th of the amount
credited to the Participant's Interest
Account and/or Equity Fund Account as of
January 1 next following the first
anniversary of the termination of employment.
iii. Each succeeding installment payment shall be
determined in a similar manner, i.e., the
fraction of Participant's Interest Account
and/or Equity Fund Account balance to be paid
out shall increase each year to 1/8th, 1/7th,
etc., until the tenth installment which shall
equal the then remaining balance of the
account.
b. If the Participant elects the Share Unit Account,
the amount, if any, shall be paid in cash as follows:
i. The first annual payment shall be made
during the first quarter of the calendar
year following the date of termination of
employment, and shall be in an amount
equal to the value of 1/10th of the
number of Share
43
<PAGE> 10
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
Units credited to the Participant's
account as of the date of termination of
employment. The value of each Share
shall be determined by multiplying the
market value of a share of common stock of
the Company on the date of termination of
employment by the number of such Share
Units. Payment shall be made by the
Company in cash. After the amount of the
first installment has been determined, 1/10
of the Share Units credited to the
Participant's account on the date of
termination of employment shall be
cancelled as of the date of termination of
employment.
ii. A second annual payment shall be
made during the first quarter of the
calendar year following the year during
which the first anniversary of the date of
termination of employment occurs, and shall
be in an amount equal to the value of 1/9th
of the number of Share Units credited to
the Participant's account as of the first
anniversary of the date of termination of
employment. The value of such Share Units
shall be determined by multiplying the
market value of a share of the common stock
of the Company on the first anniversary of
the date of termination of employment by
the number of such Share Units. Payment
shall be made by the Company in cash.
After the amount of the second installment
has been determined, 1/9th of the Share
Units credited to the account of the
Participant on the first anniversary of
the date of termination of employment
shall be cancelled as of the first
anniversary of the date of termination of
employment.
iii. Each succeeding installment payment
shall be determined in a similar manner,
the tenth annual installment being an
amount equal to the value of the total
number of Share Units credited to the
account of
44
<PAGE> 11
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
the Participant on the ninth
anniversary of the date of termination of
employment.
(8) DISTRIBUTION IN EVENT OF FINANCIAL EMERGENCY
If requested by a Participant while in the employ of
the Company or a subsidiary and the Committee
determines that a financial emergency has occurred in
the financial affairs of the Participant, the
Interest, Share Unit and/or Equity Fund Accounts of
the Participant on the date the Participant makes the
request may be paid out at the sole discretion of the
Committee in the same manner they would have been
paid out had the Participant terminated his
employment with the Company or Subsidiary on the date
of such request. In the event of a payout due to the
financial emergency, a second Interest, Share Unit or
Equity Fund Account shall be established for the
Participant and any awards made to the Participant
thereafter shall be credited to this second Interest,
Share Unit or Equity Fund Account. The Participant's
rights to the second Interest, Share Unit or Equity
Fund Account shall be the same as his rights to the
initial Interest, Share Unit or Equity Fund Account.
(9) ACCELERATION OF PAYMENTS
Notwithstanding the provisions in Item 6.B.(7) and
(8), if the amount remaining in a Participant's
Interest Account, Share Unit or Equity Fund Account
at any time is less than $50,000, or in the event of
a financial emergency occurring in the personal
affairs of the Participant, or his Beneficiary in
case of his death, during the payout period, the
Committee may elect to accelerate the payout
thereafter of the Participant's Interest, Share Unit
or Equity Fund Account.
(10) MARKET VALUE
The market value of a share of the common stock of
the Company on a particular day shall be determined
by the Committee. The market value shall be the
closing price on the New York Stock Exchange on
45
<PAGE> 12
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
the day in question, or the day of the last previous
sale, if there shall not be any sale on the day in
question.
(11) BENEFICIARY DESIGNATION
A Participant may designate a Beneficiary who is to
receive, upon his death, the distributions that
otherwise would have been paid to him. All
designations shall be in writing and shall be
effective only if and when delivered to the
Secretary of the Company during the lifetime of the
Participant. If a Participant designates a
Beneficiary without providing in the designation that
the Beneficiary must be living at the time of each
distribution, the designation shall vest in the
Beneficiary all of the distribution whether payable
before or after the Beneficiary's death, and any
distributions remaining upon the Beneficiary's death
shall be made to the Beneficiary's estate.
A Participant may from time to time during his
lifetime change his Beneficiary by a written
instrument delivered to the Secretary of the Company.
In the event a Participant shall not designate a
Beneficiary as aforesaid, or if for any reasons such
designation shall be ineffective, in whole or in
part, the distribution that otherwise would have been
paid to such Participant shall be paid to his estate
and in such event the term "Beneficiary" shall
include his estate.
(12) CORPORATE CHANGES
A. DISSOLUTION OR LIQUIDATION OF COMPANY
Notwithstanding any provision herein to the
contrary, upon the dissolution or liquidation of
the Company, the Share Units credited to
Participant's Share Unit Accounts shall be
converted to dollars as of the day preceding the
date of dissolution or liquidation, using the
method applied in Item 6.B.(6) hereof to determine
installment payments. The Company shall cause
such dollar balance to be paid out in cash in a
lump sum to the participants, or their
Beneficiaries, as the case may be, within 60 days
following the date of dissolution or liquidation.
46
<PAGE> 13
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
B. MERGER, CONSOLIDATION OR SALE OF ASSETS
Notwithstanding anything herein to the contrary,
in the event that the Company desires to
consolidate with, merge into, or transfer all or
substantially all of its assets to another
corporation (hereinafter referred to as "Successor
Corporation"), such Successor Corporation may
assume the obligation under this Plan, provided
that appropriate amendments are made to the Plan.
In the event the Plan is not continued within a
reasonable period of time by the Successor
Corporation, then as of the date preceding the
date of such consolidation, merger, or transfer,
the account of each Participant shall be converted
into dollars and distributed as provided in Item
6.B.(11)a.
(13) FIXED PAYMENT ACCOUNT
Notwithstanding the preceding provisions of Item
6.B., the Committee may, at its sole election,
offer to a Participant the option to convert all or a
specified amount of his Interest, Share Unit and/or
Equity Fund Account to a Fixed Payment Account which
shall provide for payments at such times and in such
amounts as shall be determined by the Committee.
7. RIGHTS OF PARTICIPANTS
No Participant or Beneficiary shall have any interest in any
fund or in any specific asset or assets of the Company (or any
subsidiary) by reason of any account under the Plan. It is intended
that the Company has merely a contractual obligation to make payments
when due hereunder and it is not intended that the Company (or any
subsidiary) hold any funds in reserve or trust to secure payments
hereunder. No Participant may assign, pledge, or encumber his/her
interest under the Plan, or any part thereof, except that a
Participant may designate a Beneficiary as provided herein.
Nothing contained in this Plan shall be construed to:
47
<PAGE> 14
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
A. Give any employee or Participant any right to receive any
award other than in the sole discretion of the Committee;
B. Give a Participant any rights whatsoever with respect to
share(s) of common stock of the Company;
C. Limit in any way the right of the Company or subsidiary
to terminate a Participant's or other employee's employment at
any time; or
D. Be evidenced of any agreement or understanding, express or
implied, that a Participant or other employee will be retained
in any particular position or at any particular rate of
remuneration.
8. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee
may, from time to time, establish rules for the administration of the
Plan that are not inconsistent with the provisions of the Plan.
9. AMENDMENT OR TERMINATION
The Board may modify or amend, in whole or in part, any or all
of the provisions of the Plan, or suspend or terminate it entirely;
provided, however, that no such modifications, amendment, or
suspension or termination may, without the consent of the
Participant, or his Beneficiary in the case of his/her death, reduce
the right of a Participant, or his/her Beneficiary, as the case may
be, to any payment due under the Plan.
10. CHANGE OF CONTROL
Notwithstanding any other provision of this Plan, within 30
days of a Change of Control (as defined below), each participant
shall be entitled to receive a lump sum payment in cash equal to the
product of (x) such participant's formula award for the year in which
the Change of Control occurs, based on maximum achievable award for
such Participant under the Plan and (y) a fraction, the numerator of
which is the number of days after January 1 in the year in which the
Change of Control occurs and the denominator of which is 365. In
addition, the
48
<PAGE> 15
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
Company shall pay to each Participant a lump sum amount in cash
within 30 days of the Change of Control all amounts accumulated in
such Participant's Interest, Share Unit and Equity Fund Account
under the Plan. In determining the amount accumulated in a
Participant's Share Unit Account, each Share Unit shall have a value
equal to the higher of (x) the highest reported sales price, regular
way, of a share of the Company's common stock on the Composite Tape
for New York Stock Exchange Listed Stocks (the "Composite Tape")
during the sixty-day period prior to the date of the Change of
Control of the Company and (y) if the Change of Control of the
Company is the result of a transaction or series of transactions
described in paragraphs A. or C. of the definition of Change of
Control of the Company set forth below, the highest price per share
of common stock of the Company paid in such transaction or series
of transactions. A Change of Control means any of the following
events:
A. The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either:
(1) The then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or
(2) The combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in
the election of directors (the "Company Voting
Securities"), provided, however, that any acquisition
by (x) the Company or any of its subsidiaries, or any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries or
(y) any corporation with respect to which, following
such acquisition, more than 60% of, respectively, the
then outstanding shares of common stock of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Company Voting
Securities immediately prior to such acquisition in
substantially the
49
<PAGE> 16
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
same proportion as their ownership, immediately prior
to such acquisition, of the Outstanding Company Common
Stock and Company Voting Securities, as the case may be,
shall not constitute a Change in Control of the Company;
or
B. Individuals who, as of May 24, 1989, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any individual
becoming a director subsequent to May 24, 1989 whose election
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of the
Directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act);
or
C. Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business
Combination"), in each case, with respect to which all or
substantially all of the individuals and entities who were the
respective beneficial owners of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such
Business Combination do not, following such Business
Combination, beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination in
substantially the same proportion as their ownership
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Company Voting
Securities, as the case may be; or
D. A complete liquidation or dissolution of the Company or sale
or other disposition of all or substantially all of the assets
of the Company other than to a corporation with respect to
which, following such sale or disposition, more than 60% of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding
50
<PAGE> 17
JOHNSON CONTROLS, INC.
EXECUTIVE INCENTIVE COMPENSATION PLAN
DEFFERED OPTION
MARCH 21, 1995
voting securities entitled to vote generally in the
election of directors is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and
entitles who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Company Voting Securities
immediately prior to such sale or disposition in substantially
the same proportion as their ownership of the Outstanding
Company Common Stock and Company Voting Securities, as the case
may be, immediately prior to such sale or disposition.
11. TAX WITHHOLDING
The Company shall have the right to deduct from all cash payments
any federal, state, or local taxes required by law to be withheld
with respect to such cash payments and, in case of awards paid in
Common Stock, the Participant or other person receiving such
Common Stock may be required to pay to the Company the amount of
any such taxes which the Company is required to withhold with
respect to such Common Stock.
51
<PAGE> 1
EXHIBIT 11
JOHNSON CONTROLS, INC.
COMPUTATION OF PRIMARY AND FULLY DILUTED
EARNINGS PER SHARE
(in millions, except per share data)
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------
1995 1994 1993
------ ------ -----
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net Income $195.8 $165.2 $15.9
Preferred dividends, net of tax
benefit (9.4) (9.3) (9.1)
------ ------ -----
Earnings available for common
shareholders $186.4 $155.9 $6.8
------ ------ -----
Average common shares outstanding
Common stock 40.9 40.6 40.4
Common stock equivalents -
Assumed exercise of stock options 0.3 0.4 0.4
------ ------ -----
41.2 41.0 40.8
------ ------ -----
Primary earnings per share $4.53 $3.80 $0.17
====== ====== =====
FULLY DILUTED EARNINGS PER SHARE
Net Income $195.8 $165.2 $15.9
After tax compensation expense
which would arise from the assumed
conversion of the Series D
Convertible Preferred Stock (5.8) (5.9) (6.0)
------ ------ -----
Fully diluted earnings 190.0 159.3 9.9
------ ------ -----
Average common shares outstanding
Common stock 40.9 40.6 40.4
Conversion of Series D Convertible
Preferred Stock 3.1 3.3 3.3
Common stock equivalents -
Assumed exercise of stock option 0.5 0.4 0.6
------ ------ -----
44.5 44.3 44.3
------ ------ -----
Fully diluted earnings per share $4.27 $3.60 $0.17 (1)
====== ====== =====
</TABLE>
(1) Calculation is anti-dilutive.
52
<PAGE> 1
EXHIBIT 12
JOHNSON CONTROLS, INC.
COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(dollars in millions)
<TABLE>
<CAPTION>
For the Year Ended
September 30, 1995
<S> <C>
Net income $195.8
Provision for income taxes 162.9
Undistributed earnings of partially-owned affiliates (5.0)
Minority interest in earnings of consolidated subsidiaries 29.2
Amortization of previously capitalized interest 3.5
------
386.4
Fixed charges:
Interest incurred and amortization of debt expense 75.0
Estimated portion of rent expense 29.7
------
Fixed charges 104.7
Less: Interest capitalized during period (11.0)
------
93.7
------
Earnings $480.1
======
Ratio of earnings to fixed charges 4.6
======
</TABLE>
For the purpose of computing this ratio, "earnings" consist of (a) income
from continuing operations before income taxes (adjusted for undistributed
earnings or recognized losses of partially-owned affiliates, minority interest
in earnings or losses of consolidated subsidiaries, and amortization of
previously capitalized interest, plus (b) fixed charges, minus (c) interest
capitalized during the period. "Fixed charges" consist of (a) interest incurred
and amortization of debt expense plus (b) the portion of rent expense
representative of the interest factor.
53
<PAGE> 1
MANAGEMENT'S DISCUSSION AND ANALYSIS
FISCAL 1995 COMPARED TO FISCAL 1994
SALES
Consolidated net sales for 1995 reached a record $8,330 million, representing a
21% increase from 1994. A substantial portion of the increase reflects higher
sales of automotive seating. A 34% increase in automotive segment sales to
$3,836 million was primarily generated by the Company's participation in new and
successful vehicle programs worldwide and continued strong North American
vehicle production levels. New vehicle programs launched in 1995 in which the
Company participated included Chrysler's Cirrus/Stratus sedans and Jeep
Cherokee, General Motors' Jimmy/ Blazer and Toyota's Avalon. In January 1995 we
acquired the remaining interest in a domestic seating business which produces
rear seats for the Ford Explorer. The consolidation of this business also
contributed to the year-over-year increase. European seating sales increased
substantially as a result of the success of new business for customers including
Ford, Rover and Skoda, and favorable currency translation rates.
Controls segment sales for 1995 were $2,630 million, 16% greater than in 1994.
This increase stemmed from a higher level of activity in the existing
buildings market. Strong growth within the worldwide integrated facility
management market was largely due to the acquisition of Procord, a United
Kingdom facility management services provider, in September 1994. A contract to
operate six United Kingdom Atomic Energy Authority sites in March 1995, was also
a major contributor to the sales increase. Sales of retrofit control systems to
the non-residential buildings market, primarily in the form of performance
contracts, also contributed to the increase. Facility management activity in the
U.S. government market was lower year over year.
Plastics segment sales rose 19% over the 1994 level to $1,192 million. The
improvement resulted from the pass-through of higher resin prices to customers
worldwide and higher unit shipments of water, other beverage and single-serve
soft drink containers in both North America and Europe. Increased sales to
emerging Latin American markets and favorable currency translation rates also
contributed to the sales improvement. Sales of plastics machinery improved
modestly as compared to the prior year, partially due to the acquisition in the
third quarter of 1995 of B&W Kunststoffmaschinenbau Handelsgesellschaft
mbH, a plastics machinery manufacturer located in Germany and the Czech
Republic.
Sales of the battery segment declined 9% to $672 million in 1995.
Total unit shipments were lower due to the loss of the supply contract to Sears,
Roebuck & Company, for which final shipments were made in September 1994.
Several factors helped offset a portion of this decline. The segment's unit
shipments to existing customers, both in the aftermarket and to original
equipment manufacturers, increased approximately 8%. In addition, higher lead
costs, which are passed through to customers in pricing, increased sales.
Assuming continued slow economic expansion in the U.S. and in Europe, management
expects consolidated sales for 1996 will exceed 1995 levels. Automotive segment
sales are expected to increase approximately 10%-15%, reflecting the launch of
new business, both domestically and outside the U.S., the Company's
participation in successful vehicle models, and relatively stable vehicle
production levels in North America and Europe. These comments do not reflect the
effects of the Company's anticipated acquisition of the Roth Freres companies.
See "Pending Acquisition". Management expects an increase in controls segment
sales of approximately 10%-15%. The anticipated driver of this increase is a
higher level of activity in the existing buildings market, primarily in
integrated facility management and performance contracting. At September 30,
1995, the unearned backlog of commercial building systems, services, and
integrated facility management contracts, to be executed within the next fiscal
year, was $1,122 million. The increase from the prior year amount of $857
million was due to growth in orders for performance contracting and integrated
facility management, including acquisitions. The unearned backlog of government
operations and maintenance contracts, which reflects only the noncancellable
portion of uncompleted contracts, was $442 million at September 30, 1995. This
was 25% lower than the prior year as a result of scope reductions on several
U.S. government projects and the loss of certain contracts. Plastics segment
sales improvement of 10%-15% is expected in 1996 from gains in container unit
volumes, particularly in Europe and Latin America. Battery segment sales are
expected to increase approximately 5%-10% from 1995 levels as a result of
increased sales to new and existing customers and further penetration of the
original equipment market.
<TABLE>
<CAPTION>
Common Stock Price Range Dividends
- - ----------------------------------------------------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
First Quarter $ 45 7/8-50 3/8 $51 1/2-55 1/2 $ .39 $ .36
Second Quarter 45 3/4-52 1/2 52 -61 1/4 .39 .36
Third Quarter 50 5/8-58 1/4 44 7/8-56 3/4 .39 .36
Fourth Quarter 56 3/8-66 46 1/2-53 1/2 .39 .36
- - ----------------------------------------------------------------------
Year $ 45 3/4-66 $44 7/8-61 1/4 $1.56 $1.44
- - ----------------------------------------------------------------------
</TABLE>
20
<PAGE> 2
OPERATING INCOME
Consolidated operating income was $449 million for 1995, an increase of 23% over
1994. The increase can be primarily attributed to the strong improvement in
consolidated net sales.
The automotive segment's operating income of $222 million was 54% higher
than the prior year. The segment benefited from higher volumes in both North
America and Europe, and successful cost containment initiatives which lowered
manufacturing expense. The segment's European operations generated income during
1995 as compared with a loss in the prior year, reflecting a number of new
programs moving from the start-up phase into production.
Operating income of the controls segment improved 12% to $106 million as a
result of the increased activity in the worldwide existing buildings market.
Income grew at a lesser rate than sales primarily due to the high level of
investments associated with supporting the rapid integrated facilities
management growth and the assimilation of acquisitions.
Plastics operating income of $74 million rose 3% over the prior year due to the
increases in European container and worldwide plastics machinery volumes.
In North America, container operating margins declined due to unabsorbed fixed
costs which resulted from weaker than anticipated market demand. The Company was
successful in recovering resin price increases from customers, however, this
also lowered the operating margin percentage.
Battery operating income decreased 15% in 1995 to $47 million as a result of the
overall unit volume decline noted above. The segment was successful at
reducing costs to partially offset the effect of a volume decline. The segment's
fourth-quarter operating income exceeded the prior year's results despite the
loss of the Sears account, reflecting the group's success in reducing costs.
Consolidated operating income is expected to improve in 1996, with the
improvement derived primarily from the higher projected sales. The automotive
segment's operating income is anticipated to rise as the benefits from volume
increases related to new business and involvement in successful vehicle programs
will more than offset higher product development costs associated with new
programs. The automotive segment has supply agreements with certain of its
customers that provide for annual productivity price reductions and, in some
instances, for the recovery of material and labor cost increases. The segment
has been, and anticipates it will continue to be, able to substantially offset
any sales price changes with cost reductions from design changes, productivity
improvements and similar programs with suppliers. The controls segment will
continue to benefit from the activity in the existing buildings market,
especially from sales of retrofit systems. The plastics segment is expected to
show operating income improvement due to increased worldwide sales and cost
reduction programs. The battery segment's operating income is expected to
increase over 1995, primarily as a result of higher unit shipments and continued
cost reduction efforts.
OTHER INCOME/EXPENSE
Net interest expense in 1995 was $57 million, $17 million higher than the prior
year. The increase resulted from the financing associated with acquisitions and
higher short-term interest rates. Net interest expense for 1996 is expected to
remain level with the current year before considering the possible impact of
business acquisitions. See "Pending Acquisition."
Interest income of $6 million was $2 million higher than the prior year as
proceeds from the issuance of long-term debt were held on deposit for part of
the year.
Miscellaneous-net expense of $10 million was $7 million higher than the
prior year because of a decline in equity income. The lower equity income was
primarily due to the approximately $6 million impact of the devaluation of the
Mexican peso on the Company's unconsolidated Mexican affiliates.
21
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
PROVISION FOR INCOME TAXES
The effective income tax rate for 1995 was 42%, slightly lower than the
1994 rate of 43%. The effective rate declined due to improved performance by the
Company's European operations. The effective rate for the fiscal year remained
higher than the combined federal and state statutory rate of approximately 40%,
due in part to overall higher foreign effective rates.
MINORITY INTERESTS
Minority interests in net earnings of subsidiaries increased $8 million
to $29 million in 1995. The increase relates to higher earnings from certain of
the Company's North American automotive seating joint ventures.
NET INCOME
Net income rose 19% in 1995 to $196 million as a result of the increase
in operating income, offset by the increases in interest and miscellaneous-net
expenses. Primary and fully diluted earnings per share were $4.53 and $4.27,
respectively, for 1995, up from $3.80 and $3.60 in 1994.
FISCAL 1994 COMPARED TO FISCAL 1993
SALES
Consolidated net sales rose 11% in 1994 to $6,871 million. This increase was
generated by improvements in all four business segments. Sales of automotive
seating and seating components rose 12% over the prior year to $2,874 million.
This increase was primarily driven by strong North American vehicle production
and the Company's participation in new and successful vehicle programs. New
vehicle programs with which the Company participated included Chrysler's Jeep
Grand Cherokee, Concorde, Intrepid, Vision, and Neon, Ford's Villager and
Nissan's Quest and Altima. North American automotive industry car and light
truck production grew approximately 13% over the prior year period. European
seating sales improved slightly over 1993 levels. The increase resulting from
our participation in successful vehicle programs in Europe, primarily with
Toyota and SEAT, a Volkswagen subsidiary, was partially offset by declines in
existing business.
Controls segment sales improved 11% over 1993 to $2,260 million. This increase
was generated by higher sales to the North American commercial buildings market,
in particular, the installation of control systems in existing buildings. Strong
growth within the integrated facility management market also contributed
to the sales increase. International sales increased, principally due to a U.K.
acquisition and higher activity in the Pacific Rim. Government facility
management activities decreased slightly. The segment completed three
acquisitions during 1994 including Network Integration Services, a domestic
network installation and operations management specialist acquired in January;
Haydon, a United Kingdom controls service business acquired in July; and
Procord, a United Kingdom integrated facility management services provider
acquired in September.
Plastics segment sales for 1994 were $998 million, representing an 11%
improvement over the comparable 1993 period. The increase was driven by higher
unit shipments of all container types, both domestically and in Europe.
Non-soft drink container sales, primarily high-heat bottles for juices and
isotonic sports drinks and water containers, grew substantially. Soft drink
container unit shipments improved slightly, led by single-serve containers.
Price reductions, however, had an offsetting impact on soft drink container
sales. Plastics blowmolding machinery sales improved modestly.
Higher unit shipments helped the battery segment increase sales to $738 million,
an 8% improvement over the prior year. Aftermarket unit shipment increases
resulted from the extreme winter and summer weather, while strong domestic
vehicle production resulted in higher shipments to the original equipment
market. Current year volumes were only slightly impacted by the loss of the
supply contract with Sears, under which final shipments were made in September
1994.
OPERATING INCOME
Consolidated operating income increased 17% to $365 million, principally as a
result of the improvement in sales. Operating income for the automotive segment
rose $16 million, or 12%, over the prior year. North American income benefited
from higher volume and improved manufacturing efficiencies associated with
existing vehicle programs. This increase was partially offset by higher
engineering, research and development, and administrative expenses associated
with the support of new and existing vehicle programs. The high
22
<PAGE> 4
level of investment reflects the emerging trend by vehicle manufacturers to
outsource design, development and project management of seating systems and to
reimburse suppliers for these costs through prices on future seat sales as
opposed to up-front reimbursement. European operations continued to operate at a
loss; however, results were slightly improved from the prior year. Volume
improvements related to new business were largely offset by higher engineering
and administrative expenses incurred to support the European growth.
The controls segment's operating income improved $10 million or 12% over 1993
as a result of the increased sales to the existing commercial buildings market.
Plastics operating income rose $10 million, or 16%, over the prior year. Sales
growth of higher margin non-soft drink containers was the primary reason
for this increase. In addition, productivity improvements and continuing
programs to contain and reduce costs offset competitive pricing pressures and
contributed to increases in margins.
Battery operating income rose $16 million, or 41%, in 1994 as a result of the
substantial increase in unit volumes and manufacturing efficiency improvements.
During the year, the segment accrued over $10 million of costs associated with
the announced closings of two manufacturing plants scheduled for 1995. The plant
closings and other cost reduction programs resulted from the segment's need to
lower its cost structure. Prior year operating income reflected approximately
$10 million in charges associated with the closings of two other plants.
OTHER INCOME/EXPENSE
Net interest expense was $7 million lower than the prior year. A decrease
experienced through the first half of 1994, resulting from
business segments
<TABLE>
<CAPTION>
Operating Assets Depreciation/ Capital
Year ended September 30, Net Sales Income (Year End) Amortization Expenditures
- - --------------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C> <C> <C>
1995
Automotive $3,836.3 $221.8 $1,647.2 $131.8 $212.0
Controls 2,630.3 105.8 1,073.1 46.9 56.5
Plastics 1,191.7 74.6 840.0 74.3 135.4
Battery 672.0 46.6 482.8 35.5 46.8
Unallocated - - 277.8 - -
------------------------------------------------------------------------------------------
Consolidated $8,330.3 $448.8 $4,320.9 $288.5 $450.7
- - --------------------------------------------------------------------------------------------------------------------------
1994
Automotive $2,874.0 $143.8 $1,308.5 $102.0 $168.3
Controls 2,259.9 94.5 929.1 44.8 28.7
Plastics 998.2 72.2 722.1 69.6 90.0
Battery 738.4 54.7 462.5 41.9 60.5
Unallocated - - 384.7 - -
------------------------------------------------------------------------------------------
Consolidated $6,870.5 $365.2 $3,806.9 $258.3 $347.5
- - --------------------------------------------------------------------------------------------------------------------------
1993
Automotive $2,556.4 $128.2 $1,028.4 $ 95.4 $145.6
Controls 2,040.3 84.3 732.3 44.2 31.9
Plastics 900.3 62.2 686.8 58.3 57.8
Battery 684.7 38.7 454.1 40.4 63.0
Unallocated - - 329.2 - -
------------------------------------------------------------------------------------------
Consolidated $ 6,181.7 $313.4 $3,230.8 $238.3 $298.3
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
the recapitalization of certain foreign operations in the prior year, was
partially offset by an increase in fourth-quarter expense associated with the
issuance of $125 million of 8.2% debentures.
Miscellaneous-net expense declined by $3 million compared to 1993. This
primarily resulted from a $5 million increase in equity income associated with
improved performance by automotive seating and battery equity affiliates.
PROVISION FOR INCOME TAXES
The effective income tax rate for 1994 was 43%, slightly higher than the
1993 rate of 42%. The effective rate for the fiscal year remained higher than
the combined U.S. federal and state statutory rate of approximately 40%, due to
higher foreign effective tax rates and nondeductible amortization of goodwill
associated with business acquisitions.
MINORITY INTERESTS
Minority interests in net earnings of subsidiaries increased to $21 million
from $16 million in 1993. The increase was due to improved performance
by certain of the Company's North American automotive seating joint ventures.
NET INCOME
Net income, before the cumulative effect of 1993 accounting changes described
below, rose 20% in 1994 to $165 million as the result of improvements in
operating income, interest expense and equity income. Primary and fully diluted
earnings per share before the cumulative effect of accounting changes, were
$3.80 and $3.60, respectively, for 1994, up from $3.16 and $2.98 in 1993.
During 1993, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," SFAS No. 109, "Accounting for Income Taxes," and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." The combined cumulative
effect of these accounting changes was a one-time charge of $151.8 million
before taxes ($122 million, or $2.99 per share on a primary basis and $2.81 per
share fully diluted, after taxes.) In addition, 1993 earnings from operations
were reduced by $20.1 million ($7.1 million, or $.20 per share on a primary
basis and $.22 per share fully diluted, after taxes) for incremental costs
resulting from the accounting changes.
CAPITAL EXPENDITURES AND OTHER INVESTMENTS
Capital expenditures were $451 million, $348 million, and $298 million in 1995,
1994 and 1993, respectively. Consistent with the prior year, a significant
portion of 1995 expenditures related to the expansion of automotive facilities
and product lines, both domestically and in Europe. Expenditures were also made
for capacity expansion for
<TABLE>
<CAPTION>
quarterly financial data
First Second Third Fourth Full
Year ended September 30, Quarter Quarter Quarter Quarter Year
- - ------------------------------------------------------------------------------------------------------------------------------------
(in millions, except per share data; unaudited)
<S> <C> <C> <C> <C> <C>
1995
Net sales $1,857.6 $2,050.5 $2,180.9 $2,241.3 $8,330.3
Gross profit $ 277.3 $ 288.5 $ 319.0 $ 372.9 $1,257.7
Net income $ 41.2 $ 32.3 $ 55.3 $ 67.0 $ 195.8
Earnings per share
Primary $ .95 $ .73 $ 1.28 $ 1.57 $ 4.53
Fully diluted $ .90 $ .70 $ 1.21 $ 1.46 $ 4.27
- - ------------------------------------------------------------------------------------------------------------------------------------
1994
Net sales $1,585.0 $1,682.1 $1,757.8 $1,845.6 $6,870.5
Gross profit $ 252.6 $ 241.0 $ 278.3 $ 336.6 $1,108.5
Net income $ 38.1 $ 25.5 $ 45.6 $ 56.0 $ 165.2
Earnings per share
Primary $ .87 $ .56 $ 1.06 $ 1.31 $ 3.80
Fully diluted $ .83 $ .54 $ 1.00 $ 1.23 $ 3.60
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 6
plastic container operations. Capital expenditures for 1996 are projected to
approximate $350-$375 million. The majority of the spending will be focused
on new automotive seating product lines and European automotive facilities.
Plastics spending will be lower in 1996 as a portion of the capacity that was
put in place in 1995 was underutilized.
Goodwill increased $25 million to $519 million at September 30, 1995. The
increase is attributable to business acquisitions during 1995. All acquisitions
were accounted for as purchases and, as such, operating results are included
since their respective acquisition dates.
Investments in partially-owned affiliates of $91 million were approximately $9
million lower than the prior year, primarily as a result of dividends received
and currency translation effects, which more than offset the recording of equity
income.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
Cash provided by operating activities was $370 million during 1995 compared to
$447 million in 1994. Increases in 1995 accounts receivable and other working
capital items, resulting from higher levels of business activity, exceeded
the benefit of increased net income as adjusted for depreciation, amortization
of intangibles and other noncash income and expense items. Total working capital
declined to $154 million at September 30, 1995 from $262 million one year ago.
This decline reflects an increase in short-term debt which was used to fund the
Company's capital spending and current year acquisitions.
CAPITALIZATION
The Company's capitalization of $2,168 million at September 30, 1995 included
short-term debt of $198 million, long-term debt of $630 million and
shareholders' equity of $1,340 million. Total debt as a percentage of total
capitalization increased to 38% from 37% at September 30, 1994. In October 1994,
the Company issued $103 million of medium-term notes, the proceeds of which were
used to refinance $60 million of bank borrowings and $35 million of medium-term
notes due in December 1994. In March 1995, the Company issued $125 million of
20-year, 7.7% debentures and $30 million of 6.92% private notes, the proceeds of
which were used to refinance the Company's $150 million of 8.875% notes which
would have been due in 1998.
A $250 million revolving line of credit agreement, established in 1991, is
available to support working capital requirements and to back up commercial
paper borrowings. At September 30, 1995, $130 million of short-term borrowings
were outstanding compared to $19 million in 1994. Additional unused credit
facilities of approximately $324 million are available to the Company's
international subsidiaries.
A shelf registration statement is on file with the Securities and Exchange
Commission under which the Company can issue a total of $350 million in
debt securities. Since the filing, $125 million of 7.7%, 20-year debentures,
putable after 10 years, have been issued under the registration.
High credit ratings from Standard & Poor's (A), Moody's (A2) and Fitch (A) are
maintained on the Company's long-term debt.
The Company's capital resources and liquidity position are considered sufficient
to meet projected needs. Requirements for working capital, capital
expenditures, dividends and debt maturities in fiscal 1996 will continue to be
funded from operations, supplemented by short-term or long-term borrowings, if
required.
Because of its global operations, the Company participates in the foreign
exchange markets in order to minimize the Company's risk of loss from
fluctuations in exchange rates. The Company closely monitors its exposure to
fluctuations in currencies and, where cost-justified, adopts strategies to
reduce the impact of these fluctuations on the Company's financial performance.
These strategies include engaging in various hedging activities to manage income
and cash flows denominated in foreign currencies, and using foreign currency
borrowings when appropriate to finance investments outside the United States.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company's U.S. operations are governed by federal environmental laws,
principally the Resource Conservation and Recovery
25
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Air Act, and the Clean Water Act, as well as state counterparts
("Environmental Laws"), and by federal and state laws addressing worker
safety and health ("Worker Safety Laws"). These laws govern ongoing operations
and the remediation of sites associated with past operations. Under certain
circumstances these laws provide for civil and criminal penalties and fines, as
well as injunctive and remedial relief.
The Company's policy is to comply with applicable Environmental Laws and
Worker Safety Laws, and it has expended substantial resources, both financial
and managerial, to comply with such laws and for measures designed to protect
the environment and maximize worker protection and safety. In addition, in view
of diminishing capacity and increasing costs and liabilities associated with the
usage of disposal facilities, the Company continues to implement processes and
procedures designed to reduce waste.
The Company believes it is in substantial compliance with such laws, and
maintains procedures designed to ensure compliance. However, the Company has
been, and in the future may become, the subject of formal or informal
enforcement actions or proceedings. Such matters typically are resolved by
negotiation with regulatory authorities resulting in commitments to compliance
or abatement programs and payment of penalties. Historically, neither such
commitments nor penalties imposed on the Company have been material.
Environmental Laws require that certain parties fund remedial actions regardless
of fault, legality of original disposal or ownership of the site. The Company
is currently participating in environmental assessment and remediation at a
number of sites under these laws, and it is likely that in the future the
Company will be involved in additional environmental assessments and
remediations. Such sites include facilities that had been engaged in the
recycling of lead batteries.
Future remediation costs at these and other sites are subject to a number of
uncertainties, including the method and extent of remediation (dependent, in
part, on existing laws and technology), the percentage and type of material
attributable to the Company, the financial viability of site owners and the
other parties, and the availability of insurance coverage. A charge to earnings
is recorded for sites when it is probable that a liability has been incurred and
the cost can be reasonably estimated.
While environmental considerations are a part of all significant capital
expenditure decisions, in excess of $2 million of the Company's total
expenditures in 1995 related solely to environmental compliance. In addition,
remedial response and related expenses were approximately $9 million. At
September 30, 1995, an accrued liability of approximately $33 million was
maintained relating to environmental matters. The Company's environmental
liabilities are undiscounted and do not take into consideration any possible
recoveries of future insurance proceeds or claims against third parties. Because
of the uncertainties associated with environmental assessment and remediation
activities, future expenses to remediate the currently identified sites could be
considerably higher than the accrued liability. However, while neither the
timing nor the amount of ultimate costs associated with known environmental
assessment and remediation matters can be determined at this time, the Company
does not expect that these matters will have a materially adverse effect on its
financial position, results of operations or cash flows.
On June 30, 1995, the Company appealed to the Wisconsin Court of Appeals, the
Milwaukee County Circuit Court's order granting the summary judgment motion of
the Employers Insurance of Wausau and dismissing Johnson Controls' complaint
seeking to recover environmental investigation and remediation costs at 21
sites. The Circuit Court based its decision on the reasoning of a 1994 Wisconsin
Supreme Court case that held that under the law of Wisconsin, response costs
under CERCLA (a/k/a Superfund) are not "damages" as that term is used in
comprehensive general liability policies. The Company has not recorded any
anticipated recoveries of future insurance proceeds, and therefore, the outcome
of this case should have no significant impact on the Company's consolidated
financial statements.
If future Environmental and Worker Safety Laws contain more stringent
requirements than currently anticipated, expenditures may have a more
significant effect on the Company's financial position, results of operations
or cash flows. Competitors face the same laws, and, accordingly, the Company
should not be placed at a competitive disadvantage.
PENDING ACQUISITION
The Company has reached agreement to acquire approximately 75% of the
Roth Freres companies for $175 to $200 million. Roth Freres is a major supplier
of seating and interior components to the European automotive industry.
Headquartered in Strasbourg, France, it is a privately held company with
estimated 1995 sales of $600 million. The acquisition is expected to be
completed by December 31, 1995, following government approvals. Financing for
the acquisition will initially be with short-term debt.
26
<PAGE> 8
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(in millions, except per share data) Year ended September 30,
1995 1994 1993
<S> <C> <C> <C>
Net sales $8,330.3 $6,870.5 $6,181.7
Cost of sales 7,072.6 5,762.0 5,233.2
-----------------------------------------
Gross profit 1,257.7 1,108.5 948.5
Selling, general and administrative expenses 808.9 743.3 635.1
-----------------------------------------
Operating income 448.8 365.2 313.4
-----------------------------------------
Interest income 6.2 4.4 5.8
Interest expense (57.4) (40.7) (47.7)
Miscellaneous - net (9.7) (2.5) (5.3)
-----------------------------------------
Other income (expense) (60.9) (38.8) (47.2)
-----------------------------------------
Income before income taxes,
minority interests and cumulative effect of accounting changes 387.9 326.4 266.2
Provision for income taxes 162.9 140.3 112.8
Minority interests in net earnings of subsidiaries 29.2 20.9 15.5
-----------------------------------------
Income before cumulative effect of accounting changes 195.8 165.2 137.9
Cumulative effect of accounting changes, net of income taxes -- -- (122.0)
-----------------------------------------
Net income $ 195.8 $ 165.2 $ 15.9
-----------------------------------------
Earnings available for common shareholders $ 186.4 $ 155.9 $ 6.8
-----------------------------------------
Earnings per share before cumulative effect of accounting changes
Primary $ 4.53 $ 3.80 $ 3.16
Fully diluted $ 4.27 $ 3.60 $ 2.98
-----------------------------------------
Cumulative effect of accounting changes per share
Primary -- -- $ (2.99)
Fully diluted -- -- $ (2.81)
-----------------------------------------
Earnings per share
Primary $ 4.53 $ 3.80 $ .17
Fully diluted $ 4.27 $ 3.60 $ .17(1)
-----------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
(1) Calculation is anti-dilutive.
27
<PAGE> 9
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(in millions) September 30,
-----------------------------
1995 1994
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 103.8 $ 132.6
Accounts receivable, less allowance for doubtful accounts of $22.2 and $23.4, respectively 1,287.5 1,067.0
Inventories 355.5 304.7
Other current assets 317.1 274.2
-----------------------------
Current assets 2,063.9 1,778.5
Property, plant and equipment - net 1,518.8 1,333.4
Goodwill, less amortization of $128.7 and $106.4, respectively 519.1 493.8
Investments in partially owned affiliates 90.8 99.7
Other noncurrent assets 128.3 101.5
-----------------------------
Total assets $4,320.9 $3,806.9
LIABILITIES AND EQUITY
Short-term debt $ 130.2 $ 19.2
Current portion of long-term debt 67.7 24.8
Accounts payable 983.5 814.9
Accrued compensation and benefits 258.5 246.3
Accrued income taxes 35.5 39.4
Billings in excess of costs and earnings on uncompleted contracts 87.8 76.2
Other current liabilities 346.3 295.6
-----------------------------
Current liabilities 1,909.5 1,516.4
================================================================================================================================
Long-term debt 630.0 670.3
Postretirement health and other benefits 168.8 167.1
Other noncurrent liabilities 272.4 250.3
Shareholders equity 1,340.2 1,202.8
-----------------------------
Total liabilities and equity $4,320.9 $3,806.9
================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE> 10
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(in millions) Year ended September 30,
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $195.8 $165.2 $ 15.9
Adjustments to reconcile net income to cash provided by operating activities
Depreciation 256.3 230.4 212.1
Amortization of intangibles 32.2 27.9 26.2
Equity in earnings of partially owned affiliates (1.6) (9.4) (4.9)
Noncurrent deferred income taxes (1.7) (3.1) (23.9)
Cumulative effect of accounting changes -- -- 122.0
Other -- 1.5 24.9
Changes in working capital, excluding acquisition of businesses
Accounts receivable (216.4) (103.3) (55.3)
Inventories (40.0) (8.0) 19.4
Other current assets (40.6) (19.6) (43.2)
Accounts payable and accrued liabilities 181.0 186.7 184.0
Accrued income taxes (5.6) (20.0) 24.2
Billings in excess of costs and earnings on uncompleted contracts 10.8 (1.1) (9.7)
-------------------------------------
Cash provided by operating activities 370.2 447.2 491.7
-------------------------------------
INVESTING ACTIVITIES
Capital expenditures (450.7) (347.5) (298.3)
Sale of property, plant and equipment 17.3 28.3 16.3
Acquisition of businesses (30.6) (167.9) (56.1)
Additions of long-term investments (6.4) (21.7) (11.4)
Proceeds from long-term investments 18.1 11.5 13.1
Other .3 .2 .9
-------------------------------------
Cash used by investing activities (452.0) (497.1) (335.5)
-------------------------------------
FINANCING ACTIVITIES
Increase (decrease) in short-term debt 107.1 (17.5) (99.9)
Issuance of long-term debt 218.8 202.8 42.1
Repayment of long-term debt (206.8) (26.5) (36.8)
Payment of cash dividends (76.3) (71.4) (68.1)
Other 9.7 4.4 9.4
-------------------------------------
Cash provided (used) by financing activities 52.5 91.8 (153.3)
-------------------------------------
Effect of exchange rate changes on cash and cash equivalents .5 3.0 (11.4)
-------------------------------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $ (28.8) $ 44.9 $ (8.5)
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE> 11
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unearned Capital in Treasury Cumulative
Preferred Compensation Common Excess of Retained Stock, Translation
(in millions) Total Stock - ESOP Stock Par Value Earnings at Cost Adjustments
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AT SEPTEMBER 30, 1992 $ 1,194.2 $ 171.1 $(159.4) $ 7.0 $ 493.6 $ 681.4 $(55.2) $55.7
Net income 15.9 -- -- -- -- 15.9 -- --
Reduction of guaranteed ESOP debt 6.0 -- 6.0 -- -- -- -- --
Cash dividends
Series D preferred ($3.97 per
one ten-thousandth of a share),
net of $4.1 million tax benefit (9.1) -- -- -- -- (9.1) -- --
Common ($1.36 per share) (54.9) -- -- -- -- (54.9) -- --
Translation adjustments (79.6) -- -- -- -- -- -- (79.6)
Other, including options exercised 6.5 (3.0) -- -- 9.4 -- .1 --
- - -----------------------------------------------------------------------------------------------------------------------------------
AT SEPTEMBER 30, 1993 1,079.0 168.1 (153.4) 7.0 503.0 633.3 (55.1) (23.9)
Net income 165.2 -- -- -- -- 165.2 -- --
Reduction of guaranteed ESOP debt 6.8 -- 6.8 -- -- -- -- --
Cash dividends
Series D preferred ($3.97 per
one ten-thousandth of a share),
net of $3.6 million tax benefit (9.3) -- -- -- -- (9.3) -- --
Common ($1.44 per share) (58.5) -- -- -- -- (58.5) -- --
Translation adjustments 16.4 -- -- -- -- -- -- 16.4
Other, including options exercised 3.2 (4.0) -- .1 6.9 -- .2 --
- - -----------------------------------------------------------------------------------------------------------------------------------
AT SEPTEMBER 30, 1994 1,202.8 164.1 (146.6) 7.1 509.9 730.7 (54.9) (7.5)
Net income 195.8 -- -- -- -- 195.8 -- --
Reduction of guaranteed ESOP debt 7.9 -- 7.9 -- -- -- -- --
Cash dividends
Series D preferred ($3.97 per
one ten-thousandth of a share),
net of $3.1 million tax benefit (9.4) -- -- -- -- (9.4) -- --
Common ($1.56 per share) (63.8) -- -- -- -- (63.8) -- --
Translation adjustments .3 -- -- -- -- -- -- .3
Other, including options exercised 6.6 (4.0) -- -- 10.6 -- -- --
- - -----------------------------------------------------------------------------------------------------------------------------------
AT SEPTEMBER 30, 1995 $1,340.2 $ 160.1 $(138.7) $7.1 $520.5 $853.3 $(54.9) $(7.2)
- - -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
30
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Johnson Controls, Inc. and its majority-owned domestic and foreign
subsidiaries. All significant intercompany transactions have been eliminated.
Investments in partially owned affiliates are accounted for by the equity
method when the Company's interest exceeds 20%. Gains and losses from the
translation of most foreign currency financial statements are accumulated as a
separate component of shareholders' equity.
INVENTORIES: Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method for most inventories at
domestic locations. Cost of other inventories is determined on the first-in,
first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT: The Company uses the straight-line method of
depreciation for financial reporting purposes and accelerated methods for
income tax purposes.The general range of useful lives for financial reporting
is 10 to 50 years for buildings and improvements and 3 to 20 years for
machinery and equipment.
INTANGIBLES: Goodwill arising from business acquisitions is amortized using the
straight-line method over periods of 15 to 40 years. Patents and other
intangibles are amortized over their estimated lives. The Company reviews the
carrying value of goodwill for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
Measurement of any impairment would include a comparison of estimated future
operating cash flows anticipated to be generated during the remaining life of
the goodwill to the net carrying value of goodwill.
REVENUE RECOGNITION: The Company recognizes revenue from long-term
contracts of the controls segment and machinery produced by the plastics
segment over the contractual period under the percentage-of-completion method
of accounting (see "Long-Term Contracts"). In all other cases, the Company
recognizes revenue at the time products are shipped or as services are
performed.
LONG-TERM CONTRACTS: Under the percentage-of-completion method of accounting
used for long-term contracts, sales and gross profit are recognized as work
is performed based on the relationship between actual costs incurred and total
estimated costs at completion. Sales and gross profit are adjusted
prospectively for revisions in estimated total contract costs and contract
values. Estimated losses are recorded when identified. Claims against customers
are recognized as revenue upon settlement. The amount of accounts receivable
due after one year is not significant.
EARNINGS PER SHARE: Primary earnings per share are computed by dividing net
income, after deducting dividend requirements on the Series D Convertible
Preferred Stock, by the weighted average number of common shares and
common stock equivalents which would arise from the exercise of stock options.
Fully diluted earnings are computed by deducting from net income the after-tax
compensation expense which would arise from the assumed conversion of the
Series D Convertible Preferred Stock, which was $5.8 million, $5.9 million and
$6.0 million in 1995, 1994 and 1993, respectively. Fully diluted weighted
average shares assume the conversion of the Series D Convertible Preferred
Stock, if dilutive, plus the dilutive effect of the stock options.
The weighted average number of shares used in the primary and fully diluted
earnings per share computations were as follows:
<TABLE>
<CAPTION>
Year ended September 30,
- - -------------------------------------------------
(in millions of shares) 1995 1994 1993
--------------------------
<S> <C> <C> <C>
Primary 41.2 41.0 40.8
Fully diluted 44.5 44.3 44.3
- - -------------------------------------------------
</TABLE>
CASH FLOW: For purposes of the Consolidated Statement of Cash Flows,
the Company considers all investments with a maturity of three months or less
at the time of purchase to be cash equivalents.
ACCOUNTING CHANGES: Effective October 1, 1992, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," No. 109, "Accounting for Income
Taxes," and No. 112, "Employers' Accounting for Postemployment Benefits."
The combined cumulative effect of the accounting changes was a one-time charge
of $151.8 million before taxes ($122 million or $2.99 per share on a primary
basis and $2.81 per share fully diluted, after taxes). Additional disclosures
related to these accounting changes are included in Note 8 for SFAS No. 106,
Note 11 for SFAS No. 109 and Note 9 for SFAS No. 112.
NOTE 1 - INVENTORIES
<TABLE>
<CAPTION>
September 30,
- - ------------------------------------------------------
(in millions) 1995 1994
----------------------
<S> <C> <C>
Raw materials and supplies $145.1 $100.2
Work in process 112.9 112.6
Finished goods 149.6 134.0
- - ------------------------------------------------------
FIFO inventories 407.6 346.8
LIFO reserve (52.1) (42.1)
- - ------------------------------------------------------
LIFO inventories $355.5 $304.7
- - ------------------------------------------------------
</TABLE>
Inventories valued by the LIFO method of accounting were approximately
61% and 66% of total inventories at September 30, 1995 and 1994, respectively.
31
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
September 30,
- - ----------------------------------------------------------------
(in millions) 1995 1994
-------------------------
<S> <C> <C>
Buildings and improvements $ 594.8 $ 553.6
Machinery and equipment 2,168.1 1,868.2
Construction in progress 220.7 193.5
- - ----------------------------------------------------------------
2,983.6 2,615.3
Land 57.9 53.9
- - ----------------------------------------------------------------
3,041.5 2,669.2
Less accumulated depreciation 1,522.7 1,335.8
- - ----------------------------------------------------------------
Property, plant and equipment - net $ 1,518.8 $ 1,333.4
- - ----------------------------------------------------------------
</TABLE>
Interest costs capitalized during 1995, 1994, and 1993 were $11.0
million, $5.9 million and $3.0 million, respectively.
NOTE 3 - LEASES
Certain administrative and production facilities and equipment are leased under
long-term agreements. Most leases contain renewal options for varying periods,
and certain leases include options to purchase the leased property during or at
the end of the lease term. Leases generally require the Company to pay for
insurance, taxes and maintenance of the property. Leased capital assets
included in net property, plant and equipment, primarily buildings and
improvements, were $26 million and $31 million at September 30, 1995 and 1994,
respectively.
Other facilities and equipment are leased under arrangements which are
accounted for as operating leases. Total rental expense was $89 million in
1995, $73 million in 1994 and $72 million in 1993.
Future minimum capital and operating lease payments and the related present
value of capital lease payments at September 30, 1995 were as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
- - -------------------------------------------------------------------
(in millions)
<S> <C> <C>
1996 $ 4.9 $ 52.4
1997 4.8 39.7
1998 4.5 27.4
1999 4.4 16.7
2000 2.7 7.5
After 2000 17.5 45.6
- - -------------------------------------------------------------------
Total minimum lease payments 38.8 $ 189.3
- - -------------------------------------------------------------------
Interest 12.4
Present value of net minimum lease payments $ 26.4
- - -------------------------------------------------------------------
</TABLE>
NOTE 4 - SHORT-TERM DEBT AND CREDIT AGREEMENTS
Short-term debt at September 30, 1995 and 1994 consisted entirely of
bank borrowings. At September 30, 1995, the Company had unsecured lines of
credit available from banks totalling $579 million. The lines of credit are
subject to the usual terms and conditions applied by banks. Domestic lines of
credit totalling $255 million are available for support of outstanding
commercial paper. The average short-term debt outstanding during 1995 and 1994
was $211 million and $144 million, respectively. The weighted average interest
rate on short-term debt outstanding at September 30, 1995 and 1994, was
5.76% and 7.43%, respectively. Total interest paid on both long-term and
short-term debt was $66 million, $43 million and $51 million in 1995, 1994 and
1993, respectively.
NOTE 5 - LONG-TERM DEBT
<TABLE>
<CAPTION>
September 30,
- - -------------------------------------------------------------------------------------
(in millions) 1995 1994
--------------------
<S> <C> <C>
Bank borrowings $ -- $ 60.0
Unsecured notes
6.15% due in 1996 30.0 30.0
8.875% due in 1998 -- 149.8
8.2% due in 2024 125.0 125.0
6.92% due in 1998 30.0 --
7.7% due in 2015 124.8 --
Industrial revenue bonds due through 2006,
net of unamortized discount of $3.0 million
in 1995 and $3.2 million in 1994 51.4 52.3
Medium-term notes due in 1996, 1997 and 1999
at an average interest rate of 7.56% 123.0 54.8
Guaranteed ESOP debt due in increasing annual
installments through 2004 at an average
interest rate of 7.34% (tied in part to LIBOR) 138.7 146.6
Capital lease obligations 26.4 34.9
Other 48.4 41.7
- - ------------------------------------------------------------------------------------
697.7 695.1
Less current portion 67.7 24.8
- - ------------------------------------------------------------------------------------
Long-term debt $ 630.0 $ 670.3
- - ------------------------------------------------------------------------------------
</TABLE>
In March 1995, the Company refinanced its $150 million, 8.875% debentures due
in 1998 by issuing $125 million of 7.7% debentures due in 2015 and $30 million
of 6.92% private placement notes due in 1998.
32
<PAGE> 14
In October 1994, the Company issued $53 million of 7.18% medium-term notes due
in 1997 and $50 million of 7.63% medium-term notes due in 1999. The proceeds
were used to refinance a portion of the existing medium-term notes and certain
bank borrowings. Accordingly, at September 30, 1994, $60 million of bank
borrowings and $35 million of the medium-term notes due in 1995 were classified
as long-term debt.
Industrial revenue bond financed facilities have been accounted for as plant
and equipment. The related bonds issued by the government units are recorded
as long-term debt. Fixed rate industrial revenue bonds totalling $27 million at
September 30, 1995 and $28 million at September 30, 1994 had a weighted average
interest rate of 6.3%. Variable rate bonds of $27 million at September 30,
1995 and $28 million at September 30, 1994 had weighted average interest rates
of 4.7% and 3.9%, respectively.
In 1989 the Company established an employee stock ownership plan (ESOP). The
ESOP was financed with $175 million in debt issued by the ESOP. The ESOP debt
is guaranteed by the Company as to payment of principal and interest and,
therefore, the unpaid balance has been recorded as long-term debt. The
dividends on the Series D Preferred Stock held by the ESOP plus Company
contributions to the ESOP are used by the ESOP to service the debt. Therefore,
interest incurred on the ESOP debt of $10 million for each of the years 1995,
1994, and 1993 has not been reflected as interest expense in the Company's
Consolidated Statement of Income.
The installments of long-term debt maturing in each of the next five years
(including the guaranteed ESOP debt) are: 1996 - $68 million, 1997 - $34
million, 1998 - $104 million, 1999 - $19 million and 2000 - $78 million.
The indentures for the unsecured notes and the guaranteed ESOP debt include
various financial covenants, none of which are expected to restrict future
operations.
NOTE 6 - FINANCIAL INSTRUMENTS
The fair values of cash and cash equivalents and short-term debt approximate
their carrying values. The fair value of long-term debt shown below was
determined using market interest rates and discounted future cash flows.
The fair values of hedging instruments were obtained from dealer quotes and
published foreign currency exchange rates. A comparison of the carrying values
in the Consolidated Statement of Financial Position and estimated fair values
of these financial instruments is as follows:
<TABLE>
<CAPTION>
September 30,
- - ----------------------------------------------------------------------
(in millions) 1995 1994
----------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
- - ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term debt $630 $665 $670 $663
Forward contracts 4 6 5 5
Interest rate swap 5 6 2 3
- - ----------------------------------------------------------------------
</TABLE>
HEDGING TRANSACTIONS: The Company has global operations and participates in the
foreign exchange markets to minimize its risk of loss from fluctuations in
exchange rates. The Company enters into forward exchange contracts to hedge
certain of its foreign currency commitments. Realized and unrealized gains and
losses on these contracts are recognized as income in the same periods as the
hedged commitments. The Company's forward exchange contracts generally have
maturities which do not exceed twelve months in duration, and are designed to
coincide with settlement dates of the related transactions.
In March 1994, the Company settled its $54 million cross-currency interest rate
swap agreement and subsequently entered into a cross-currency interest rate
swap agreement and forward contract to continue to hedge a portion of its $160
million of net investments in its German subsidiaries. Under the swap, the
Company receives interest based on a floating U.S. dollar commercial paper rate
on $30 million and pays interest based on a floating Deutschemark ("DM") LIBOR
rate on 50 million DM through March 1997, at which time the Company will
receive $30 million in exchange for paying 50 million DM. Under the terms of
the forward contract, the Company will pay 50 million DM in exchange for $30
million in March 1997. Related foreign exchange gains and losses on the
notional principal values of these two instruments are deferred in the
cumulative translation adjustments account ("CTA") within shareholders' equity.
The total pretax exchange loss deferred in CTA of approximately $14 million at
September 30, 1995, was offset by translation gains on the underlying net
investments. Gains and losses on the interest component of the swap are
recorded as interest expense in the Consolidated Statement of Income on a
current basis.
All contracts are executed with major international financial institutions
and, as such, the Company does not anticipate that these institutions will fail
to perform.
33
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following forward contracts, by which the Company sold or purchased
currencies, were outstanding at September 30, 1995:
<TABLE>
<CAPTION>
Currency Currency Contract
Sold Purchased Amount
- - ------------------------------------------
(in millions)
<S> <C> <C>
British Pound German DM $100
German DM U.S. Dollar 84
Spanish Peseta German DM 44
Canadian Dollar U.S. Dollar 35
Portuguese Escudo German DM 19
German DM Belgian Franc 13
U.S. Dollar Italian Lira 13
French Franc German DM 11
Others 57
- - ------------------------------------------
$376
- - ------------------------------------------
</TABLE>
NOTE 7 - SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30,
- - ------------------------------------------------------------
(in millions of shares) 1995 1994
-----------------------
<S> <C> <C>
Preferred Stock, $1.00 par value
Authorized 2.0 2.0
Issued and outstanding
Series D Convertible * *
- - ------------------------------------------------------------
Common Stock, $.16 2/3 par value
Authorized 150.0 150.0
Issued and outstanding 41.1 40.7
- - ------------------------------------------------------------
</TABLE>
*312.7224 and 320.4416 shares of Series D Convertible Preferred Stock were
outstanding at September 30, 1995 and 1994, respectively.
In 1989 the Company issued 341.7969 shares of 7.75% Series D Convertible
Preferred Stock to its newly established ESOP for $175 million. The Preferred
Stock was issued in fractional amounts representing one ten-thousandth of a
share each or 3.4 million Preferred Stock units in total. Each Preferred Stock
unit has a liquidation value of $51.20.
The ESOP financed its purchase of the Preferred Stock units by issuing debt in
the amount of $175 million. The ESOP debt is guaranteed by the Company and is
therefore recorded as long-term debt of the Company. An amount representing
unearned employee compensation, equivalent in value to the unpaid balance of
the ESOP debt, has been recorded as a deduction from shareholders' equity. The
net increase in shareholders' equity at September 30, 1995 and 1994 resulting
from the above transactions was $21 million and $18 million, respectively.
Preferred Stock units are allocated to participating employees based on the
annual ESOP debt service payments and are held in trust for the employees until
their retirement, death, or vested termination.
Each allocated unit may be converted into one share of common stock or redeemed
for cash equal to the greater of the current market value of the common stock
or $51.20, at the election of the employee or beneficiary, upon retirement,
death or vested termination. The Company, at its option, may issue shares of
its common stock or distribute cash to the ESOP to redeem the Preferred Stock
units. As of September 30, 1995, 3.1 million shares of common stock were
reserved for the conversion of the Preferred Stock units. Employees may vote
allocated units, and the plan trustee is to vote unallocated units in the same
proportion as the allocated units are voted.
Dividends on the Preferred Stock are deductible for income tax purposes
and enter into the determination of earnings available for common shareholders
net of their tax benefit.
The Company held 1.7 million shares of its common stock in treasury at
September 30, 1995. These shares may be used for a variety of purposes,
including employee benefit and stock option plans.
Options to purchase common stock of the Company, at prices equal to or higher
than market values on dates of grant, are granted to key employees under
stock option plans. Stock appreciation rights (SARs) may be granted in
conjunction with the stock option grants under one plan. Options or SARs are
exercisable between one and ten years after date of grant. Shares available for
future grant under stock option plans were 1.2 million at September 30, 1995.
Following is a summary of activity in the stock option plans for 1995 and 1994:
<TABLE>
<CAPTION>
Weighted Shares
Average Subject to
Option Price Option SARs
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding
September 30, 1993 $34.74 1,422,846 259,898
Granted 53.81 664,900 137,200
Exercised 31.01 295,090 33,291
Cancelled 39.80 160,116 22,984
- - ---------------------------------------------------------------------------
Outstanding
September 30, 1994 42.69 1,632,540 340,823
Granted 49.31 693,700 210,058
Exercised 33.81 418,055 77,118
Cancelled 45.72 330,543 77,960
- - ---------------------------------------------------------------------------
Outstanding,
September 30, 1995(1) $47.32 1,577,642 395,803
- - ---------------------------------------------------------------------------
Exercisable,
September 30, 1995 $37.90 476,492 130,428
- - ---------------------------------------------------------------------------
</TABLE>
(1) Option exercise prices range from $33.13 to $53.81 per share.
Under the terms of a Rights Agreement, as amended effective November 16, 1994,
each share of the Company's common stock entitles its holder to one Right. The
Rights Agreement provides that if
34
<PAGE> 16
20% or more of the Company's common stock is acquired, the Rights become
exercisable. Further, upon the occurrence of certain defined events, the Rights
entitle the holder to purchase common stock of the Company or common stock
of an "acquiring company" having a market value equivalent to two times the
Right's exercise price of $175. In addition, the Rights Agreement permits the
Company's Board of Directors, in certain circumstances, to exchange the Rights
for shares of common stock and permits a bidder to call for a shareholders'
vote to redeem the Rights. The Rights are subject to redemption by the Board of
Directors for $.01 per Right. The Rights have no voting power and expire
November 30, 2004.
Approximately $47 million of consolidated retained earnings at September 30,
1995 represents undistributed earnings of the Company's partially-owned
affiliates accounted for by the equity method.
NOTE 8 - RETIREMENT PLANS
PENSION BENEFITS: The Company has noncontributory defined benefit pension
plans covering most domestic and certain foreign employees. The benefits
provided are based primarily on years of service and average compensation or a
monthly retirement benefit amount. Funding for domestic pension plans equals or
exceeds the minimum requirements of the Employee Retirement Income Security Act
of 1974 (ERISA). Also, the Company makes contributions to union-trusteed
pension funds for construction and service personnel and to defined
contribution plans for the majority of Johnson Controls World Services Inc.
employees. Net pension expense for defined benefit plans included the following
components:
<TABLE>
<CAPTION>
Year ended September 30,
- - --------------------------------------------------------------------------------
(in millions) 1995 1994 1993
---------------------------------------
<S> <C> <C> <C>
Service cost $28.0 $25.6 $23.3
Interest cost on projected
benefit obligation 46.5 41.7 37.1
Actual return on plan assets (75.6) (16.7) (67.1)
Net amortization and deferral 21.6 (33.6) 20.3
- - --------------------------------------------------------------------------------
Net pension expense $20.5 $17.0 $13.6
- - --------------------------------------------------------------------------------
</TABLE>
The following schedule details the funded status of the Company's
defined benefit pension plans. Plans with assets exceeding the accumulated
benefit obligation (ABO) are segregated by column from plans with the ABO
exceeding assets. The plans with the ABO exceeding assets were primarily
foreign plans which are not subject to ERISA. The projected benefit obligation
was determined using assumed discount rates of 7.75% and 8.0% at September 30,
1995 and 1994, respectively. Pension expense was determined using assumed
discount rates of 8.0% in 1995 and 8.25% in 1994 and 1993. The assumed
long-term rate of return on plan assets was 9.75% in 1995, and 10% in 1994 and
1993. The average rate of compensation increase assumed was 6.0% in 1995, 1994
and 1993.
<TABLE>
<CAPTION>
September 30,
- - -------------------------------------------------------------------------------------------
(in millions) 1995 1994
--------------------------------------------------------
Assets ABO Assets ABO
Exceed Exceeds Exceed Exceeds
ABO Assets ABO Assets
- - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value
of benefit obligations
Vested $408.5 $ 97.0 $350.8 $ 91.3
Nonvested 26.7 4.7 24.0 4.5
- - -------------------------------------------------------------------------------------------
Accumulated benefit
obligation 435.2 101.7 374.8 95.8
Effect of projected
salary increases 117.2 12.5 95.6 13.0
- - -------------------------------------------------------------------------------------------
Total projected benefit
obligation 552.4 114.2 470.4 108.8
Plan assets at fair value 546.6 49.1 473.6 53.8
- - -------------------------------------------------------------------------------------------
(Deficit) excess of plan
assets over projected
benefit obligation (5.8) (65.1) 3.2 (55.0)
Unrecognized
transitional asset (27.2) (9.9) (29.8) (2.4)
Unrecognized net loss 49.7 11.1 49.4 3.7
- - -------------------------------------------------------------------------------------------
Prepaid (accrued)
pension expense $ 16.7 $(63.9) $ 22.8 $(53.7)
- - -------------------------------------------------------------------------------------------
</TABLE>
At the measurement dates of June 30, 1995 and 1994, plan assets included
approximately 402,000 and 390,000 shares, respectively, of Johnson Controls,
Inc. common stock with total market values of $22.7 million and $18.9 million
at the respective dates.
During 1989, the Company established an ESOP as part of its existing savings
and investment (401K) plan, which is available to eligible domestic employees.
The ESOP issued debt to finance its purchase of 3.4 million units (341.7969
shares) of the Company's Series D Convertible Preferred Stock for $175 million.
The Preferred Stock units are being allocated to participating employees over
the 15-year term of the ESOP debt and held in trust until the employees'
retirement, death, or vested termination. As of September 30, 1995,
approximately 1,249,000 Preferred Stock units had been allocated to employees.
The Company's annual contributions to the ESOP, when combined with the
Preferred Stock dividends, are of an amount which will allow the ESOP to
meet its debt service requirements. This contribution amount was $6 million in
1995, $5 million in 1994, and $4 million in 1993. Total compensation expense
recorded by the Company was $19 million, $13 million and $5 million in 1995,
1994 and 1993, respectively.
POSTRETIREMENT HEALTH AND OTHER BENEFITS: The Company provides certain
healthcare and life insurance benefits for eligible retirees and their
dependents. These benefits are not funded, but are paid as incurred.
Eligibility for coverage is based on meeting
35
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
certain years of service and retirement age qualifications. These benefits
may be subject to deductibles, copayment provisions and other limitations, and
the Company has reserved the right to modify these benefits. Effective January
31, 1994, the Company modified certain salaried plans to place a limit on the
Company's cost of future annual retiree medical benefits at no more than 150%
of the 1993 cost. Most international employees are covered by government
sponsored programs, and the cost to the Company is not significant.
Effective October 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No.106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" using the immediate transition
option. Under SFAS No. 106, the costs of retiree healthcare and life insurance
benefits are accrued over relevant employee service periods. Previously, these
costs generally were charged to expense as claims were paid.
As of October 1, 1992, the accumulated postretirement benefit obligation
(transition obligation) based on the substantive plans for these benefits was
$149 million before taxes ($91 million or $2.23 per share on a
primary basis and $2.10 per share fully diluted, after taxes). In accordance
with the requirements of SFAS No. 106, the transition obligation was charged to
1993 income as the cumulative effect of an accounting change.
Net postretirement benefit expense included the following components:
<TABLE>
<CAPTION>
Year ended September 30,
- - -------------------------------------------------------------------------------
(in millions) 1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
Service cost $ 4.3 $ 4.5 $ 6.0
Interest cost on accumulated
benefit obligation 11.2 11.0 12.1
Net amortization and deferral (1.9) (1.6) --
- - -------------------------------------------------------------------------------
Net postretirement benefit expense $13.6 $13.9 $18.1
- - -------------------------------------------------------------------------------
</TABLE>
The status of the Company's postretirement benefit plans is as follows:
<TABLE>
<CAPTION>
September 30,
- - -------------------------------------------------------------------------------
(in millions) 1995 1994
--------------------------
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation
Retirees $ 84.5 $ 74.5
Vested active plan participants 15.5 17.9
Other plan participants 44.5 52.9
- - -------------------------------------------------------------------------------
144.5 145.3
- - -------------------------------------------------------------------------------
Unrecognized prior service cost 30.4 28.9
Unrecognized net gain (loss) 4.6 (1.9)
- - -------------------------------------------------------------------------------
Accrued postretirement benefit obligation $179.5 $172.3
- - -------------------------------------------------------------------------------
</TABLE>
The accumulated postretirement benefit obligation was determined using assumed
discount rates of 7.75% and 8.0% at September 30, 1995 and 1994, respectively.
An assumed discount rate of 8.0% and 8.25% was used to determine postretirement
benefit expense for 1995 and 1994, respectively. The September 30, 1995
accumulated postretirement benefit obligation was determined using assumed
healthcare cost trend rates of 12% and 9% for pre-65 and post-65 years of age
employees, respectively. The September 30, 1994 accumulated postretirement
benefit obligation was determined using assumed healthcare cost trend rates of
13% and 10% for pre-65 and post-65 years of age employees, respectively. These
rates decrease 1% per year to an ultimate rate of 6%. The healthcare cost trend
rate assumption has a significant affect on the amounts reported. To
illustrate, a one percentage point increase in the assumed healthcare cost
trend rate would have increased the accumulated benefit obligation by $8
million at September 30, 1995, and the sum of the service and interest costs in
1995 by $1 million.
No change in the Company's practice of funding these benefits on a
pay-as-you-go basis is anticipated.
NOTE 9 - POSTEMPLOYMENT BENEFITS
Effective October 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment
Benefits." SFAS No. 112 prescribes accrual accounting methods for employers who
provide certain benefits to former or inactive employees after employment but
before retirement. Previously, these costs were charged to expense as benefits
were paid. Adoption of this standard resulted in a one time transition charge
of $42.3 million before taxes ($26 million or $.64 per share on a primary basis
and $.60 per share fully diluted, after taxes). In accordance with the
requirements of SFAS No. 112, the transition obligation was charged to 1993
income as the cumulative effect of an accounting change. In 1995, the Company's
accrued post-employment benefit obligation was reduced by approximately $12
million as disabled individuals became qualified for primary Medicare coverage.
NOTE 10 - RESEARCH AND DEVELOPMENT
Expenditures for research activities relating to product development
and improvement are charged against income as incurred. Such expenditures
amounted to $137 million in 1995, $124 million in 1994, and $95 million in
1993.
36
<PAGE> 18
NOTE 11 - INCOME TAXES
Effective October 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes." SFAS No.
109 requires the use of the liability method of accounting for deferred income
taxes. The liability method measures the expected tax impact of future taxable
income or deductions implicit in the Consolidated Statement of Financial
Position. The cumulative effect as of October 1, 1992 was an expense of $5.0
million, or $.12 per share on a primary basis and $.11 per share fully diluted.
Components of income before income taxes, minority interests and cumulative
effect of accounting changes included the following:
<TABLE>
<CAPTION>
Year ended September 30,
- - -------------------------------------------------------------------------------
(in millions) 1995 1994 1993
------------------------------------------
<S> <C> <C> <C>
Domestic $307.6 $271.3 $231.5
Foreign 80.3 55.1 34.7
- - -------------------------------------------------------------------------------
Income before income taxes $387.9 $326.4 $266.2
- - -------------------------------------------------------------------------------
</TABLE>
Components of the provision for income taxes were as follows:
<TABLE>
<CAPTION>
Year ended September 30,
- - -------------------------------------------------------------------------------
(in millions) 1995 1994 1993
------------------------------------------
<S> <C> <C> <C>
Current
Federal $110.2 $109.7 $106.8
State 24.0 22.3 23.0
Foreign 24.4 21.1 20.6
- - -------------------------------------------------------------------------------
158.6 153.1 150.4
- - -------------------------------------------------------------------------------
Deferred
Federal (1.4) (17.1) (35.4)
State (.6) (1.3) (4.8)
Foreign 6.3 5.6 2.6
- - -------------------------------------------------------------------------------
4.3 (12.8) (37.6)
- - -------------------------------------------------------------------------------
Provision for income taxes $162.9 $140.3 $112.8
- - -------------------------------------------------------------------------------
</TABLE>
An analysis of effective income tax rates is shown below:
<TABLE>
<CAPTION>
Year ended September 30,
- - -------------------------------------------------------------------------------
1995 1994 1993
------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 34.8%
State income taxes,
net of federal benefit 4.2 4.2 4.3
Foreign tax expense at
different rates and foreign
losses without tax benefit .7 2.3 4.2
Other 2.1 1.5 (.9)
- - -------------------------------------------------------------------------------
42.0% 43.0% 42.4%
- - -------------------------------------------------------------------------------
</TABLE>
Deferred taxes were classified in the Consolidated Statement of Financial
Position as follows:
<TABLE>
<CAPTION>
September 30,
- - -------------------------------------------------------------------------------
(in millions) 1995 1994
--------------------------
<S> <C> <C>
Other current assets $87.6 $89.5
Other noncurrent assets 8.8 9.5
- - -------------------------------------------------------------------------------
Net deferred tax asset $96.4 $99.0
- - -------------------------------------------------------------------------------
</TABLE>
Temporary differences and carryforwards which gave rise to deferred tax assets
and liabilities included:
<TABLE>
<CAPTION>
September 30,
- - -------------------------------------------------------------------------------
(in millions) 1995 1994
--------------------------
<S> <C> <C>
DEFERRED TAX ASSETS
Accrued expenses and reserves $128.2 $111.4
Postretirement and postemployment benefits 78.7 81.8
Operating loss and foreign tax credit carryforwards 67.1 55.1
Long-term contracts -- 10.2
Other 10.7 10.7
- - -------------------------------------------------------------------------------
284.7 269.2
Valuation allowance (31.8) (27.0)
- - -------------------------------------------------------------------------------
252.9 242.2
- - -------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES
Property, plant and equipment 81.0 75.1
Employee benefits 15.6 27.3
Inventories 6.6 12.5
Leases 3.3 4.1
Long-term contracts 18.7 --
Other 31.3 24.2
- - -------------------------------------------------------------------------------
156.5 143.2
- - -------------------------------------------------------------------------------
Net deferred tax assets $ 96.4 $ 99.0
- - -------------------------------------------------------------------------------
</TABLE>
The valuation allowance primarily represents foreign loss carryforwards
and foreign tax credit carryforwards for which utilization is uncertain. These
tax benefits expire at various dates from 1996 to 2002.
Income taxes paid during 1995, 1994 and 1993 were $164 million, $162 million
and $114 million, respectively.
Domestic income taxes have not been provided on undistributed earnings of
foreign subsidiaries of $158 million which are considered to be permanently
invested. If undistributed earnings were remitted, foreign tax credits would
substantially offset any resulting domestic tax liability.
NOTE 12 - CONTINGENCIES
As of September 28, 1983, Hoover Universal, Inc. ("Hoover") sold the assets of
its Wood Preserving Division to Hoover Treated Wood Products, Inc. ("HTWP"), a
subsidiary of Ply-Gem Industries, Inc.
37
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
("PLY-GEM"). The agreement provided that Hoover retain certain liabilities
relating to that business including liability for products shipped prior to
October 1, 1983. One of the products of the Wood Preserving Division was fire
retardant treated wood. In May 1985, Hoover became a subsidiary of the Company.
The Company and its subsidiary, Hoover, have received claims related to fire
retardant treated wood sold and used in a number of structures primarily
in the eastern half of the United States. These claims allege that the fire
retardant treated wood loses its structural integrity under some circumstances
over time. Plywood manufacturers, architects, wood treaters, builders, lumber
suppliers, chemical suppliers and others are also involved in these claims.
A mediation process that includes many of these parties and their insurers is
ongoing in New Jersey, where a number of these claims are located. The efforts
have been successful in resolving much of that litigation.
The Company and its subsidiary are vigorously defending these claims and have
been successful on certain of their defenses asserted in these claims to date.
During 1993, the Company entered into agreements with two insurance carriers to
provide a total of $65 million of insurance coverage on potential fire
retardant treated wood claims. With respect to the underlying claims, liability
cannot be reasonably estimated at this time. However, it is management's
opinion that this matter will not have a materially adverse effect on the
Company's financial position, results of operations or cash flows.
The Company is also involved in a number of proceedings and potential
proceedings relating to environmental matters. At September 30, 1995, the
Company had an accrued liability of approximately $33 million relating to
environmental matters. The Company's environmental liabilities are undiscounted
and do not take into consideration any possible recoveries of future insurance
proceeds or claims against third parties. Because of the uncertainties
associated with environmental assessment and remediation activities, our future
expenses to remediate the currently identified sites could be considerably
higher than the accrued liability. Although it is difficult to estimate the
liability of the Company related to these environmental matters, the Company
believes that these matters will not have a materially adverse effect upon its
capital expenditures, earnings or competitive position.
Additionally, the Company is involved in a number of product liability and
various other suits incident to the operation of its businesses. Insurance
coverages are maintained and estimated costs are recorded for claims and suits
of this nature. It is management's opinion that none of these will have a
materially adverse effect on the Company's financial position, results of
operations or cash flows.
Note 13 - SEGMENT INFORMATION
Reference is made to pages 20 through 26 for segment financial data and an
unaudited description and discussion of the business segments.
All operating revenues and expenses are allocated to business segments and
geographical areas in determining their operating incomes. Other income
(expense), excluded from the determination of segment operating income,
includes interest income and expense, equity in earnings of partially-owned
affiliates, gains and losses from sales of long-term assets, foreign currency
gains and losses and other miscellaneous expenses. Unallocated assets are
corporate cash and cash equivalents, investments in partially owned affiliates
and other non-operating assets.
All four of the Company's business segments have sales to the automotive
industry. Four major automotive manufacturers accounted for between
approximately 5% and 11% of the Company's net sales in each of the years 1995,
1994 and 1993. As of September 30, 1995, the Company had accounts receivable
totalling $254 million from the major U.S. automotive manufacturers. The
Company's controls and battery segments have sales to the U.S. Federal
government which accounted for approximately 6% of the Company's net sales in
1995, 9% in 1994 and 10% in 1993. As of September 30, 1995, the Company's
receivables from the U.S. Federal government were $62 million.
Product transfers from domestic to foreign locations amounted to $64 million in
1995, $56 million in 1994 and $54 million in 1993. Product transfers from
foreign to domestic locations were $133 million in 1995, $43 million in
1994 and $57 million in 1993. Interarea transfers of manufactured products are
at prices in excess of cost. The resultant income is assigned to the geographic
area of manufacture.
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS Year ended September 30,
- - ------------------------------------------------------------------------------
(in millions) 1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
NET SALES
Domestic $5,873.6 $5,294.9 $4,751.0
European 1,960.6 1,171.9 1,088.6
Other foreign 496.1 403.7 342.1
- - ------------------------------------------------------------------------------
Consolidated $8,330.3 $6,870.5 $6,181.7
- - ------------------------------------------------------------------------------
OPERATING INCOME
Domestic $ 356.9 $ 316.2 $ 282.9
European 52.5 10.7 2.4
Other foreign 40.7 37.9 27.7
Eliminations (1.3) .4 .4
- - ------------------------------------------------------------------------------
Consolidated 448.8 365.2 313.4
Other income (expense) (60.9) (38.8) (47.2)
- - ------------------------------------------------------------------------------
Income before income taxes
and minority interests $ 387.9 $ 326.4 $ 266.2
- - ------------------------------------------------------------------------------
ASSETS (YEAR END)
Domestic $2,557.9 $2,261.6 $2,061.4
European 1,275.7 991.5 721.9
Other foreign 209.5 169.1 118.3
Unallocated 277.8 384.7 329.2
- - ------------------------------------------------------------------------------
Consolidated $4,320.9 $3,806.9 $3,230.8
- - ------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 20
REPORT OF MANAGEMENT
Johnson Controls management has primary responsibility for the consolidated
financial statements and other information included in this annual report
and for ascertaining that the data fairly reflect the Company's financial
position and results of operations. The Company prepared the consolidated
financial statements in accordance with generally accepted accounting
principles appropriate in the circumstances, and such statements necessarily
include amounts that are based on best estimates and judgements with
appropriate consideration given to materiality.
The Company's system of internal control is designed to provide reasonable
assurance that Company assets are safeguarded from loss or unauthorized use or
disposition and that transactions are executed in accordance with
management's authorization and are properly recorded to permit the preparation
of financial statements in accordance with generally accepted accounting
principles. This system is augmented by a careful selection and training of
qualified personnel, a proper division of responsibilities, and dissemination
of written policies and procedures. An internal audit program monitors the
effectiveness of this control system.
The Audit Committee of the Board of Directors consists entirely of
directors who are not employees of the Company. The Audit Committee reviews
audit plans, internal controls, financial reports and related matters and meets
regularly with the internal auditors and independent accountants, both of whom
have open access to the Committee.
Price Waterhouse LLP, independent accountants, audited the Company's
consolidated financial statements and issued the opinion below.
/s/ James H. Keyes
James H. Keyes
Chairman and Chief Executive Officer
/s/ Stephen A. Roell
Stephen A. Roell
Vice President and Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Shareholders of Johnson Controls, Inc.
In our opinion, the statements appearing on pages 27 through 38 of this
report present fairly, in all material respects, the financial position of
Johnson Controls, Inc. and its subsidiaries at September 30, 1995 and 1994, and
the results of their operations and their cash flows for each of the three
years in the period ended September 30, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in the Notes to Consolidated Financial Statements, the
Company changed its method of accounting for postretirement benefits other than
pensions, postemployment benefits and income taxes effective October 1, 1992.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
October 23, 1995
39
<PAGE> 21
FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
(dollars in millions, except per share data) Year ended September 30,
- - ----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993(1) 1992 1991
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $8,330.3 $6,870.5 $ 6,181.7 $5,156.5 $ 4,559.0
Operating income $ 448.8 $ 365.2 $ 313.4 $ 274.1 $ 232.9
Income before cumulative effect of accounting changes $ 195.8 $ 165.2 $ 137.9 $ 123.0 $ 95.1
Net income $ 195.8 $ 165.2 $ 15.9 $ 123.0 $ 95.1
Earnings per share before cumulative effect of accounting changes
Primary $ 4.53 $ 3.80 $ 3.16 $ 2.86 $ 2.19
Fully diluted $ 4.27 $ 3.60 $ 2.98 $ 2.73 $ 2.11
Earnings per share
Primary $ 4.53 $ 3.80 $ .17 $ 2.86 $ 2.19
Fully diluted $ 4.27 $ 3.60 $ .17(2) $ 2.73 $ 2.11
Return on average shareholders' equity 16% 15% 13%(3) 11% 9%
Capital expenditures $ 450.7 $ 347.5 $ 298.3 $ 237.4 $ 155.9
Depreciation $ 256.3 $ 230.4 $ 212.1 $ 188.8 $ 169.0
Number of employees 59,200 54,800 50,100 46,800 42,700
FINANCIAL POSITION
Working capital $ 154.4 $ 262.1 $ 247.1 $ 279.1 $ 270.8
Total assets $4,320.9 $3,806.9 $ 3,230.8 $3,179.5 $ 2,841.0
Long-term debt $ 630.0 $ 670.3 $ 500.4 $ 503.3 $ 490.6
Total debt $ 827.9 $ 714.3 $ 552.0 $ 677.8 $ 732.6
Shareholders' equity $1,340.2 $1,202.8 $ 1,079.0 $1,194.2 $ 1,064.0
Total debt to total capitalization 38% 37% 34% 36% 41%
Book value per share $ 32.09 $ 29.10 $ 26.30 $ 29.47 $ 26.64
COMMON SHARE INFORMATION
Dividends per share $ 1.56 $ 1.44 $ 1.36 $ 1.28 $ 1.24
Market prices
High $ 66 $ 61 1/4 $ 59 1/8 $ 43 3/4 $ 35 1/8
Low $ 45 3/4 $ 44 7/8 $ 38 5/8 $ 30 3/8 $ 17 1/8
Number of shareholders 37,971 33,227 30,483 27,464 25,625
Weighted average shares (in millions)
Primary 41.2 41.0 40.8 40.1 39.6
Fully diluted 44.5 44.3 44.3 43.8 43.3
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Results include the adoption of Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," No. 109, "Accounting for Income Taxes," and No.
112, "Employers' Accounting for Postemployment Benefits." The
combined cumulative effect of the accounting changes was a one-time charge
of $122 million or $2.99 per share on a primary basis and $2.81 per share
fully diluted, after taxes.
(2) Calculation is anti-dilutive.
(3) The net income amount used in calculation excludes the cumulative effect
of accounting changes; however, the cumulative effect has been reflected
in average equity computation.
40
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Below is a list of all direct and indirect subsidiaries of the company,
including all wholly-owned and partially-owned subsidiaries, in
alphabetical order.
<TABLE>
<CAPTION>
JURISDICTION
WHERE
SUBSIDIARY IS
NAME INCORPORATED
- - ---- ------------
<S> <C>
Academy Mechanical Services Ltd. Canada
Acropol-Johnson Controls World Services Singapore Pte. Ltd. Singapore
Adwest Johnson Controls Ltd. U.K.
Apple Container Corp. Delaware
B&W KUNSTSTOFF-MASCHINENBAU UND HANDELS GMBH Germany
B&W Kunststoffmaschinen Handelsgesellschaft GmbH Germany
Braune und Wulsch Industrietechnik und Vertriebs GmbH Germany
C.E.E.E. SARL France
CEMIS S.A. France
Canadian Fabricated Products Ltd. Canada
Controles Reynosa SA de CV Mexico
Controles de Presion de Ciudad Juarez Mexico
Desarrollo y Pl. SA Mexico
Ensamble de Interiores Automotrices, S.A. de C.V. Mexico
Eurosit SA Spain
</TABLE>
98
<PAGE> 2
<TABLE>
<S> <C>
F.M.S. SrL Italy
Fluid Engineering Services Ltd. Canada
Forsythe Complete Seating, Inc. Georgia
G-U Export, Inc. Wisconsin
Gaz Grunder & Anwendungs. Germany
Global Energy Systems, S.A. de C.V. Mexico
Globe International Delaware, Inc. Delaware
Globe-Union, Inc, (DE) Delaware
Haydon & Company Limited U.K.
Haydon Air Conditioning Limited U.K.
Haydon Distribution Limited U.K.
Haydon Group Limited U.K.
Haydon Management Services Limited U.K.
Hoover Universal, Inc. Michigan
Hyperion Corp. Michigan
INDU TECNO spol s.r.o. Czech Republic
Ikeda-Hoover Co. Ltd. U.K.
Industries IAMSA SA de CV Mexico
Interstate Battery System International, Inc. Delaware
J.C. Capital Corporation Minnesota
J.R.I. Technologies Ltd. U.K.
JC Export Inc. Barbados
</TABLE>
99
<PAGE> 3
<TABLE>
<S> <C>
JC S.A.R.L. Luxembourg Luxembourg
JCI Beteiligungs GmbH Germany
JCI Canfab Ltd. Canada
JCI Millet S.A. France
JCI Regelungstechnik GmbH (A) Austria
JCI Regelungstechnik GmbH (G) Germany
JOROCA, NV Belgium
Johnson Control International Sp. z.o.o. Poland
Johnson Control Products, Ltd. Nevada
Johnson Control SpA Italy
Johnson Control Systems Ltd. U.K.
Johnson Control Systems Pensions Ltd. U.K.
Johnson Controles Ltda. Brazil
Johnson Controles de Engenharia Ltda. Brazil
Johnson Controls (Barbados) Inc. Barbados
Johnson Controls (M) SDN BHD Malaysia
Johnson Controls (Portugal) Componentes de Automoveis Lda. Portugal
Johnson Controls (Proprietary) Limited South Africa
Johnson Controls (Suisse) S.A. Delaware
Johnson Controls (Thailand) Co., Ltd. Thailand
Johnson Controls (UK) Ltd. U.K.
Johnson Controls Alagon, S.A. Spain
</TABLE>
100
<PAGE> 4
<TABLE>
<S> <C>
Johnson Controls Australia Pty. Ltd. Australia
Johnson Controls Automation Systems BV The Netherlands
Johnson Controls Automobilovy Soucastky s.r.o. Czech Republic
Johnson Controls Automotive (PTY) Ltd. South Africa
Johnson Controls Automotive (UK) Ltd. U.K.
Johnson Controls Automotive Components Group Ltd. U.K.
Johnson Controls Automotive Components Ltd. U.K.
Johnson Controls Automotive Foam Ltd. U.K.
Johnson Controls Automotive NV Belgium
Johnson Controls Automotive South Africa (Pty) Ltd. South Africa
Johnson Controls Automotive Spain S.A. Spain
Johnson Controls Automotive Systems S.A. Argentina
Johnson Controls Battery (U.K.) Ltd. U.K.
Johnson Controls Battery Group, Inc. Wisconsin
Johnson Controls DISC, Inc. Delaware
Johnson Controls Engineering, Inc. Wisconsin
Johnson Controls Espana SA Spain
Johnson Controls Facilities, Inc. Wisconsin
Johnson Controls France S.A. France
Johnson Controls Gesellschaft m.b.H. Austria
Johnson Controls GmbH Germany
Johnson Controls GmbH & Co. KG Germany
</TABLE>
101
<PAGE> 5
<TABLE>
<S> <C>
Johnson Controls Holding Company de Mexico, S.A. de C.V. Mexico
Johnson Controls Holding Company, Inc. Delaware
Johnson Controls Hong Kong Ltd. Hong Kong
Johnson Controls II Assentos de Espuma Lda. Portugal
Johnson Controls International B.V. The Netherlands
Johnson Controls International Kft. Hungary
Johnson Controls International NV/SA Belgium
Johnson Controls International spol s.r.o. Czech Republic
Johnson Controls International spol s.r.o. Slovakia
Johnson Controls International, Inc. Delaware
Johnson Controls Investment Company, Inc. Delaware
Johnson Controls Jersey Limited Jersey,
Channel Islands
Johnson Controls Lahnwerk Verwaltungs GmbH & Co. KG Germany
Johnson Controls Ltd. Canada
Johnson Controls Managment Systems, Inc. Florida
Johnson Controls Marketing Verwaltungs GmbH Germany
Johnson Controls Martorell, S.A. Spain
Johnson Controls Nederland BV The Netherlands
Johnson Controls Nederland Holding BV The Netherlands
Johnson Controls Network Integration Services, Inc. Delaware
Johnson Controls Norden A/S Norway
Johnson Controls Objekt Bochum GmbH & Co. KG Germany
</TABLE>
102
<PAGE> 6
<TABLE>
<S> <C>
Johnson Controls Objekt Bochum Verwaltungs GmbH Germany
Johnson Controls Objekt Zwickau GmbH & Co. KG Germany
Johnson Controls Objekt Zwickau Verwaltungs GmbH Germany
Johnson Controls Plastics C.I.S.A. Greece
Johnson Controls Plastics Ltd. U.K.
Johnson Controls Plastics NV/SA Belgium
Johnson Controls Plastics SpA Italy
Johnson Controls Plastics-Holding NV/SA Belgium
Johnson Controls S.I.M. SpA Italy
Johnson Controls SA Switzerland
Johnson Controls SA/NV Belgium
Johnson Controls Schwalbach GmbH Germany
Johnson Controls Services Ltd. Cayman Islands
Johnson Controls Shanghai Ltd. PRC
Johnson Controls Software (Asia) Pvt. Ltd. India
Johnson Controls SpA Italy
Johnson Controls Systems S.A. Switzerland
Johnson Controls Technologies, Inc. Michigan
Johnson Controls V.I., Inc. U.S. Virgin Islands
Johnson Controls World Services (Thailand) Co., Ltd. Thailand
Johnson Controls World Services Inc. Florida
Johnson Controls World Services Ltd. Canada
</TABLE>
103
<PAGE> 7
<TABLE>
<S> <C>
Johnson Controls de Mexico SA de CV Mexico
Johnson Controls do Brasil Automotive Ltda. Brazil
Johnson Controls(s) Pte. Ltd. Singapore
Johnson Controls, Inc. Wisconsin
Johnson Controls, SA de CV Mexico
Johnson Controls/ Naue Engineering GmbH & Co. KG Germany
Johnson Controls/Naue Engineering Verwaltungs GmbH Germany
Johnson International Trade Co. Michigan
Johnson Service Co. (DE) Delaware
Johnson Service Co. (NV) Nevada
Johnson Yokogawa Corporation Delaware
Joventa USA Inc. Nevada
KTL Kunststoff-Technik GmbH & Co. KG Germany
KTL Kunststoff-Technik Verwaltungs GmbH Germany
Kata Aragon S.A. Spain
Keiper de Mexico SA de CV Mexico
Kentair (Wholesale) Limited U.K.
Komplettsitzwerk Schwalbach GmbH Germany
MAJOR, SA France
Maintenance Automation Corporation Florida
NTU-Fabrik fur Gummihaarund Schaumstofftechnik GmbH Slovakia
Naue Beteiligungs GmbH Germany
</TABLE>
104
<PAGE> 8
<TABLE>
<S> <C>
Naue GmbH & Co. KG Maschinenbau Germany
Naue Maschineubau Verwaltungs GmbH Germany
Naue de Mexico SA de CV Mexico
Naue-France SARL France
Naue-JCA Marketing GmbH & Co. KG Germany
Naue-Roth Insitu GmbH Germany
Nicco Batteries Ltd. India
Paul Carter (Environmental Services) Limited U.K.
Perfekta Algemeine Industrie - und Handels GmbH Germany
Plastics USA Corporation Michigan
Procord Limited U.K.
Propel-Johnson Controls World Services (M) Sdn. Bhd. Malaysia
Roth Johnson Technologie France
Royal LePage Facility Management Services Ltd. Canada
Semco-Johnson Controls Gerenciamento de Ativos Ltda. Brazil
Setex, Inc. Ohio
Shanghai Johnson Battery Company Limited PRC
Shanghai Johnson Controls Co. Ltd. PRC
Shanghai Johnson Controls Factory Ltd. PRC
Sistemas Automotrice Summa SA de CV ("SAS") Mexico
St. Thomas Energy Exports, Inc. Virgin Islands
Syncro Partners N.V. Belgium
</TABLE>
105
<PAGE> 9
<TABLE>
<S> <C>
TechnoTrim, Inc. Michigan
Tecnoconfort S.A. Spain
Tolena S.A. Spain
Trim Masters Inc. Kentucky
Trimco spol s.r.o. Czech Republic
Uniloy S.r.L. Italy
Uniloy (U.K.) Ltd. U.K.
Uniloy de Mexico SA de CV Mexico
Urban Engineering Co. Illinois
Vanpro Assentos Lda. Portugal
Vanpro GmbH Germany
Varta Batteries Canada Ltd. Canada
Vintec Co. Michigan
World Service Nederland BV The Netherlands
World Services Gebaudemanagement GmbH & Co. KG Germany
World Services Gebaudemangament Verwaltungs GmbH Germany
YJC Engineering Chiba Company Japan
Yokogawa Johnson Controls Corporation Japan
</TABLE>
106
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 and in the
Registration Statements on Form S-8 listed below of Johnson Controls, Inc. of
our report dated October 23, 1995 appearing on page 39 of the Annual Report to
Shareholders which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedules, which appears on page 28 of this Form 10-K.
1. Post-Effective Amendment No. 6 to Form S-16 on Form S-3
(Registration No. 2-64288)
2. Registration Statement on Form S-8 (Registration No. 33-30309)
3. Registration Statement on Form S-8 (Registration No. 33-31271)
4. Registration Statement on Form S-3 (Registration No. 33-50110)
5. Registration Statement on Form S-8 (Registration No. 33-58092)
6. Registration Statement on Form S-8 (Registration No. 33-58094)
7. Registration Statement on Form S-8 (Registration No. 33-49862)
8. Registration Statement on Form S-3 (Registration No. 33-57685)
9. Registration Statement on Form S-3 (Registration No. 33-64703)
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
December 20, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 103,800
<SECURITIES> 0
<RECEIVABLES> 1,309,700
<ALLOWANCES> 22,200
<INVENTORY> 355,500
<CURRENT-ASSETS> 2,063,900
<PP&E> 3,041,500
<DEPRECIATION> 1,522,700
<TOTAL-ASSETS> 4,320,900
<CURRENT-LIABILITIES> 1,909,500
<BONDS> 630,000
<COMMON> 7,100
160,100
0
<OTHER-SE> 1,173,000
<TOTAL-LIABILITY-AND-EQUITY> 4,320,900
<SALES> 8,330,300
<TOTAL-REVENUES> 8,330,300
<CGS> 7,072,600
<TOTAL-COSTS> 7,072,600
<OTHER-EXPENSES> 806,700
<LOSS-PROVISION> 5,700
<INTEREST-EXPENSE> 57,400
<INCOME-PRETAX> 387,900
<INCOME-TAX> 162,900
<INCOME-CONTINUING> 195,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 195,800
<EPS-PRIMARY> 4.53
<EPS-DILUTED> 4.27
</TABLE>
<PAGE> 1
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, JANUARY 24, 1996
To the Shareholders of Johnson Controls, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of Johnson
Controls, Inc., a Wisconsin corporation, will be held in the Superior Room,
Milwaukee Athletic Club, 758 North Broadway Street, Milwaukee, Wisconsin, on
Wednesday, January 24, 1996, at 2:00 o'clock P.M. (Central Standard Time), for
the following purposes:
(1) To elect four directors of the class to serve for a term of three years
expiring at the annual meeting to be held in 1999 or until the
director's earlier retirement;
(2) To consider and act upon a proposal to ratify the appointment of Price
Waterhouse as auditors for 1996;
(3) To consider and act upon a proposal to approve the Johnson Controls,
Inc., 1995 Common Stock Purchase Plan for Executives;
(4) To consider and act upon a proposal to amend the Johnson Controls,
Inc., 1992 Stock Option Plan; and
(5) To consider and act upon any other matters which may properly come
before the meeting or any adjournments thereof.
Holders of Common Stock and Preferred Stock units of record at the close of
business on December 1, 1995, will be entitled to vote at the meeting and any
adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
John P. Kennedy, Secretary
Milwaukee, Wisconsin
December 20, 1995
A PROXY FOR THE MEETING AND A PROXY STATEMENT ARE ENCLOSED HEREWITH. YOU ARE
REQUESTED TO FILL IN AND SIGN THE ENCLOSED FORM OF PROXY, WHICH IS SOLICITED BY
THE COMPANY'S BOARD OF DIRECTORS, AND TO MAIL IT PROMPTLY. SHAREHOLDERS WHO
EXECUTE PROXIES RETAIN THE RIGHT TO REVOKE THEM AT ANY TIME BEFORE THEY ARE
VOTED.
<PAGE> 2
JOHNSON CONTROLS, INC.
5757 NORTH GREEN BAY AVENUE
P.O. BOX 591
MILWAUKEE, WISCONSIN 53201
DECEMBER 20, 1995
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JANUARY 24, 1996
This proxy statement is furnished to the shareholders of Johnson Controls, Inc.
(the Company), in connection with the solicitation by the Board of Directors of
the Company of proxies for use at the annual meeting of shareholders to be held
at the Milwaukee Athletic Club at 758 North Broadway Street, Milwaukee,
Wisconsin, on January 24, 1996, at 2:00 o'clock P.M., Central Standard Time, and
any adjournments of such meeting.
Execution of a proxy given in response to this solicitation will not affect a
shareholder's right to attend the meeting and to vote in person. Presence at the
meeting of a shareholder who has signed a proxy does not alone revoke a proxy.
Any shareholder giving a proxy may revoke it at any time before it is exercised
by giving notice thereof to the Company in writing. Unless so revoked, the
shares represented by proxies will be voted at the meeting and at any
adjournments thereof. Where a shareholder specifies a choice by means of a
ballot provided in the proxy, the shares will be voted in accordance with such
specification.
Only owners of the Company's Common Stock and Preferred Stock units of record on
December 1, 1995, will be entitled to vote at the meeting. As of December 1,
1995, there were 41,120,558 shares of the Company's Common Stock outstanding,
each having one vote per share. As of December 1, 1995, there were also 310.875
shares of the Company's Preferred Stock outstanding. Each share of Preferred
Stock consists of 10,000 units, each having one vote. On October 31, 1995, the
directors, nominees for directors, and officers of the Company as a group were
beneficial owners of 624,435 shares of the Company's Common Stock (including
297,030 shares subject to options exercisable within 60 days) constituting
approximately 1.526% of the outstanding shares of Common Stock, and 7,855 units
of the Company's Preferred Stock, constituting approximately 2.516% of the
outstanding units.
Effective as of November 30, 1994, rights (Rights) declared as a dividend by the
Board of Directors of the Company were approved, to be issued to shareholders as
of November 30, 1994. The Rights are not presently exercisable, but ten days
after a person or group acquires 20% or more of the Company's Common Stock or
ten business days (subject to extension) after a person or group announces a
tender offer
1
<PAGE> 3
to acquire at least 20% of the Company's Common Stock, the Rights will become
exercisable. Such Rights will entitle each holder of Common Stock of the Company
to purchase one share of authorized but unissued Common Stock of the Company for
each Right. The exercise price of each Right is $175.00. Upon the occurrence of
certain events, including the acquisition by any person or group of 20% or more
of the Common Stock, each Right, other than Rights held by an acquiring party,
will entitle the holder to purchase, at the exercise price, Common Stock having
a market value of two times the exercise price. The Rights Agreement excludes
from the effects thereof the inadvertent acquisition of 20% or more of the
Company's Common Stock, provided there is prompt divestment to less than 20%.
The Rights may be redeemed as provided and subject to the limitations set forth
in the agreement setting forth the terms of the Rights; otherwise, such rights
expire on November 30, 2004. None of the shareholdings or percentages of
outstanding shares reported in this proxy statement reflect the Rights or shares
of Common Stock which may be purchased upon the exercise of the Rights. The
Company has prepared a Summary of Rights to Purchase Common Shares, a copy of
which is available free of charge from the Company.
Set forth below is a tabulation indicating those persons whom the management of
the Company believes to be beneficial owners of more than 5% of any class of the
Company's securities. The following information is based on reports on Schedules
13G filed with the Securities and Exchange Commission or other information
believed to be reliable.
<TABLE>
<CAPTION>
Amount and
Name and Address of Nature of Percent
Title of Class Beneficial Owner Ownership of Class
- - -------------------- ---------------------------------- ---------- --------
<S> <C> <C> <C>
Common Stock FMR Corporation 5,310,542 (1) 12.9%
$0.16 2/3 Par Value 82 Devonshire Street
Boston, MA 02109
Series D Convertible Fidelity Management Trust Company 312.107 (2) 100%
Preferred Stock 82 Devonshire Street
$1.00 Par Value Boston, MA 02109
</TABLE>
- - -------------------------
(1) FMR Corporation reported as of October 31, 1995, sole voting power with
respect to 132,582 shares, and sole dispositive power with respect to
5,298,452 shares. The report includes shares beneficially owned by Fidelity
Management and Research Company, a wholly-owned subsidiary of FMR Corp. In
addition, Fidelity International Limited, also a wholly-owned subsidiary of
FMR Corp., has sole voting and sole dispositive power with respect to
12,000 shares.
(2) Fidelity Management Trust Company reported that, as of October 31, 1995, it
held shared voting power and sole dispositive power with respect to the
shares indicated above in its capacity as trustee of the Johnson Controls,
Inc. Employee Stock Ownership Trust.
2
<PAGE> 4
ELECTION OF DIRECTORS
The Board of Directors consists of 13 members of whom approximately one-third
are elected each year to serve for terms of three years or until the director's
earlier retirement pursuant to the Board of Directors Retirement Policy(1). It
is intended that the enclosed form of proxy will be voted for the election of
Messrs. Fred L. Brengel, Robert A. Cornog, James H. Keyes, and R. Douglas
Ziegler, all of whom are now members of the Board, for three-year terms or until
the director's earlier retirement.
Directors are elected by a plurality of the votes cast by the holders of the
Company's Common Stock and Preferred Stock units at a meeting at which a quorum
is present. "Plurality" means that the individuals who receive the largest
number of votes cast are elected as directors up to the maximum number of
directors to be chosen at the meeting. Consequently, any shares not voted
(whether by abstention, broker nonvote or otherwise) have no impact in the
election of directors except to the extent the failure to vote for an individual
results in another individual receiving a larger number of votes.
- - -------------------------
(1) The Board of Directors has adopted a Retirement Policy that requires a
director to retire as of the last regular Board of Directors' meeting held
in the year of his or her 70th birthday or, in the event a shareholders'
meeting is held on that date, then such retirement shall be effective the
next day. The Retirement Policy does not apply to Mr. Brengel.
3
<PAGE> 5
The Directors Committee of the Board of Directors has no reason to believe that
any of such nominees will be unable or unwilling to serve as a director if
elected, but if any nominee should be unable or for good cause unwilling to
serve, the shares represented by proxies solicited by the Board of Directors
will be voted for the election of such other person for the office of director
as the Board of Directors may recommend in place of such nominee. Set forth
below is information with respect to the nominees and the other directors on the
Board.
CLASS OF 1999 (ALL OF WHOM ARE NOMINEES)
- - ---------------- FRED L. BRENGEL Director since 1964
Age 72
Chairman of the Board, Johnson Controls, Inc., Milwaukee,
Wisconsin, until 1993. Mr. Brengel served as the Chief
Executive Officer of Johnson Controls, Inc., from 1967 to
1988. Mr. Brengel is a director of Rexworks, Inc. Member of
Executive Committee.
- - ---------------- ROBERT A. CORNOG Director since 1992
Age 55
President, Chief Executive Officer and Chairman of the Board
of Directors of Snap-on Incorporated (tool manufacturer)
since 1991. Previously, Mr. Cornog served as President of
Macwhyte Company (wire rope manufacturer), Kenosha,
Wisconsin, a subsidiary of Amsted Industries. Mr. Cornog is
a director of Snap-on Incorporated, Wisconsin Electric
Power Company, and Wisconsin Energy Corporation. Member of
Audit Committee and Executive Committee.
4
<PAGE> 6
<TABLE>
<S> <C>
- - ---------------- JAMES H. KEYES Director since 1985
Age 55
Chairman and Chief Executive Officer, Johnson Controls, Inc.,
Milwaukee, Wisconsin. In 1985 Mr. Keyes was named Executive
[Photo] Vice President and subsequently became Chief Operating Officer
and a member of the Board of Directors. He became President of
Johnson Controls, Inc., in 1986, its Chief Executive Officer in
1988, and Chairman in 1993. Mr. Keyes is a director of Firstar
Corp., LSI Logic Corporation, and Universal Foods Corporation.
Chairman of Executive Committee.
- - ---------------- R. DOUGLAS ZIEGLER Director since 1979
Age 68
President and director, Principal Preservation Portfolios, West
Bend, Wisconsin (mutual funds) and Chairman, The Ziegler
[Photo] Companies, Inc., West Bend, Wisconsin (holding
company-financial services and environmental services). Mr.
Ziegler served as the Chief Executive Officer of The Ziegler
Companies, Inc., through 1990. Mr. Ziegler is a director of
Principal Preservation Portfolios, Inc., and The Ziegler
Companies, Inc. Chairman of Pension and Benefits Committee and
member of Executive and Directors Committees.
CLASS OF 1998
- - ---------------- WILLIAM F. ANDREWS Director since 1991
Age 64
Chairman of Schrader, Inc. and Chairman of Scovill Fasteners
Inc., since 1995. Chairman, President and Chief Executive
[Photo] Officer, Amdura Corporation from 1993-1995. President and Chief
Executive Officer, UNR Industries, Inc., Chicago, Illinois
(diversified manufacturer) from 1991 to 1993, President of
Massey Investment Company, Nashville, Tennessee (private
investment company) from 1989 to 1990, and Chairman, CEO and
President of Singer Sewing Machine Company (SSMC) Inc.,
Shelton, Connecticut (diversified manufacturer) from 1986 to
1989. Mr. Andrews is a director of Corrections Corporation of
America, Harley-Davidson, Inc., Katy Industries, Black Box
Corp., Navistar International Corporation, Northwestern Steel &
- - ---------------- Wire Co. Process Technology Holdings Co., and Southern New
England Telecommunications Corporation. Member of Compensation
and Directors Committees.
</TABLE>
5
<PAGE> 7
- - ---------------- ROBERT L. BARNETT Director since 1986
Age 55
Vice President, iDen Group, Motorola, Schaumburg, Illinois
since May, 1995. Consultant in the field of international
communications from 1992 to 1995. Vice-Chairman, Ameritech
and President, Ameritech Bell Group, American Information
Technologies Corporation, Chicago, Illinois
(telecommunications) from 1989 to 1993 and President,
Ameritech Enterprise Group, from 1987 to 1989. Mr. Barnett
is a director of USG Corp. Member of Executive and Pension
and Benefits Committees and Chairman of Directors Committee.
- - ---------------- WILLIE D. DAVIS Director since 1991
Age 61
President of All Pro Broadcasting Incorporated, Los Angeles,
California (radio broadcasting) since 1977. Mr. Davis is a
director of Alliance Bank Co., Dow Chemical Company, Kmart
Corporation, MGM Grand, Inc., Sara Lee Corporation,
Strong/Corneliuson Capital Management, Inc., and WICOR, Inc.
Member of Audit Committee.
- - ---------------- DONALD TAYLOR Director since 1975
Age 68
Principal in Sullivan Associates, Milwaukee, Wisconsin
(specialists in board of directors searches) since 1992. Mr.
Taylor served as Managing Director U.S.A., Anatar
Investments, Ltd., (venture capital specialist) from 1989
to 1992, and previously as Chairman of Rexnord, Inc.,
Milwaukee, Wisconsin. Mr. Taylor is a director of Banta
Corporation and Harnischfeger Industries, Inc. Chairman of
Compensation Committee and member of Executive and Audit
Committees.
6
<PAGE> 8
<TABLE>
<S> <C>
- - ---------------- RICHARD F. TEERLINK Director since 1994
Age 59
President and Chief Executive Officer of Harley-Davidson, Inc.,
Milwaukee, Wisconsin since March 1989. Mr. Teerlink has served
[Photo] as President and Chief Operating Officer of Harley-Davidson
since March 1988. Mr. Teerlink is a director of Firstar Bank
Milwaukee and Outboard Marine Corporation. Member of Audit
Committee.
CLASS OF 1997
- - ---------------- PAUL A. BRUNNER Director since 1983
Age 60
President and Chief Executive Officer, Spring Capital, Inc.,
Stamford, Connecticut (investment management) since 1985.
[Photo] President and Chief Executive Officer, ASED, Inc., 1982-1984.
President and Chief Executive Officer, Crouse Hinds Co.,
1967-1982. Chairman of Audit Committee and member of
Compensation Committee.
- - ---------------- SOUTHWOOD J. MORCOTT Director since 1993
Age 57
Chairman since 1990, President since 1986, and Chief Executive
Officer since 1989 of Dana Corporation, Toledo, Ohio (vehicular
[Photo] and industrial component manufacturer). Mr. Morcott is a
director of CSX Corporation, Dana Corporation, and Phelps-Dodge
Corporation. Member of Compensation Committee and Directors
Committee.
</TABLE>
7
<PAGE> 9
<TABLE>
<S> <C>
- - ---------------- MARTHA R. SEGER Director since 1991
Age 63
Visiting Distinguished Professor of Finance at Central Michigan
University from 1993 to present. John M. Olin Distinguished
Fellow in the Karl Eller Center for the Study of the Private
Market Economy, School of Business and Public Administration,
University of Arizona, Tucson, Arizona, from 1991 to 1993.
Member of the Federal Reserve Board from 1984 to 1991. Dr.
Seger is a director of Amoco Corp., Providian Corp., Fluor
Corp., Kroger, Inc., Tucson Electric, and Xerox Corp. Member of
Pension and Benefits Committee.
- - ---------------- GILBERT R. WHITAKER, JR. Director since 1986
Age 64
Professor of Business Economics, University of Michigan, 1995-
Present. Provost and Executive Vice-President for Academic
Affairs, University of Michigan, 1990-1995. Mr. Whitaker served
as Dean, School of Business Administration, University of
Michigan, from 1979 to 1990. Mr. Whitaker is a director of
Handleman Company, Lincoln National Corporation, and Structural
Dynamics Research Corp. Member of Pension and Benefits
Committee.
</TABLE>
Each of the directors or nominees for director has had the principal occupation
indicated or in certain instances has served in another executive position with
the employer indicated or an affiliate thereof during the last five years.
The Audit Committee of the Board of Directors met three times during fiscal
1995. Its functions include, but are not necessarily limited to, the following:
(1) to review the adequacy of internal controls established by management; (2)
to assess the adequacy of the financial reporting process and selection of
accounting policies; (3) to review management's evaluation and proposed
selection of independent accountants, including the appropriateness of fees, and
to recommend to the Board of Directors the appointment of independent
accountants subject to the ratification by the shareholders; (4) to review the
adequacy of audit plans prepared by internal audit and independent accountants;
(5) to review periodically the status of significant issues and internal control
recommendations; (6) to meet and to consult with the Company's internal auditors
and accounting and financial personnel and with independent public accountants
concerning the foregoing matters; (7) to report on the results of these
activities periodically to the Board of Directors; (8) to review significant
issues concerning litigation, contingent liabilities, and tax and insurance; (9)
to review management information systems of the Company; and (10) to monitor
compliance procedures of the Company and their implementation.
8
<PAGE> 10
The Compensation Committee of the Board of Directors met four times during
fiscal 1995. Its functions include, but are not necessarily limited to, the
following: (1) to consider and make recommendations to the Board of Directors
regarding the selection and retention of elected officers and certain other
principal officers and key employees of the Company and its subsidiaries; (2) to
consider and make recommendations regarding salary structure, officer gradings,
and salaries for elected officers; (3) to administer, make grants and awards,
make rules, and recommend amendments to the Company's executive compensation
plans; (4) to consider and make recommendations to the Board concerning bonus
awards, perquisites, and other remuneration to executive officers; (5) to
consider and make recommendations concerning the total compensation package for
all elected officers and to approve the disclosure of such information in the
Company's proxy statement; (6) to oversee the selection of, and to meet with,
outside consultants to review the Company's executive compensation programs as
appropriate; (7) to review and make recommendations concerning management
succession; and (8) to recommend to the Board of Directors the selection of the
Chief Executive Officer of the Company.
The Directors Committee of the Board of Directors met three times during fiscal
1995. Its function includes, but is not necessarily limited to, the following:
(1) to review the qualifications of, and to make recommendations to the Board of
Directors concerning, nominees for directors; (2) to review and consider
candidates for election as directors submitted by the shareholders; (3) to
consider and make recommendations concerning the size and composition of the
Board of Directors; (4) to develop and recommend guidelines and criteria to
determine the qualifications of directors; (5) to recommend an overall
compensation program for directors; (6) to review and recommend committees and
committee structure for the Board; (7) to recommend performance criteria for the
Board of Directors and to review its performance; and (8) to review conflicts of
interest that may affect directors. Shareholders wishing to propose director
candidates for consideration by the Directors Committee may do so by writing to
the Secretary of the Company, giving the candidate's name, biographical data and
qualifications. Further, the Company's By-Laws set forth certain requirements
for shareholders wishing to nominate director candidates for consideration by
shareholders. With respect to elections of directors to be held at an annual
meeting, among other things, a shareholder must give written notice of an intent
to make such a nomination complying with the By-Laws to the Secretary of the
Company not less than 60 days nor more than 90 days prior to the fourth Tuesday
in the month of January.
9
<PAGE> 11
The Executive Committee of the Board of Directors met once during fiscal 1995.
Its functions include the exercise of certain powers of the Board of Directors
in the general supervision and control of the business and affairs of the
Company during intervals between meetings of the Board of Directors.
The Pension and Benefits Committee of the Board of Directors met five times
during fiscal 1995. Its functions include, but are not necessarily limited to,
the following: (1) to review annually actuarial assumptions and actuarial
valuation of the pension plans of the Company; (2) to review investment policy
of the funds of the employee benefit plans of the Company; (3) to select and to
terminate investment managers as appropriate; (4) to review with investment
advisors past performance and current investment strategy; (5) to review and
approve the adoption of any new trust agreements or master trusts implementing
the plans; (6) to monitor and oversee Company policies affecting employee
benefit plans; and (7) to oversee administration of plans, to review annually
plan provisions, and to recommend amendments to the plans as appropriate.
During fiscal 1995, the Board of Directors met six times. Each director attended
80% or more of the total number of meetings held during fiscal 1995 while he or
she was a member of the Board, including meetings of committees of which the
director is a member.
Directors who are not employees receive a $33,000 annual retainer, plus $1,200
for each Board meeting they attend, $1,200 for each meeting they attend of Board
committees of which they are members, $1,500 for each meeting they attend of
Board committees of which they are chairmen, plus expenses.
In addition, directors who are not employees are covered by a medical
reimbursement plan. This medical coverage is secondary coverage and only
available to the extent a director does not have primary coverage. Effective
October 1, 1995, the Board limited the availability of this medical coverage to
those directors currently eligible for such coverage. Future directors will not
be eligible to receive this coverage. Prior to October 1, 1995, directors who
are not employees were also covered under a life insurance plan. Effective
October 1, 1995, the Board eliminated this life insurance coverage.
Under the Stock Plan for Outside Directors adopted on January 27, 1993, up to
50% of the retainer fee will be paid in Common Stock each year. The remainder
will be paid in cash at the same time. The stock will be priced as of the date
of the Annual Meeting. In addition, new directors receive an initial grant of
200 shares of Common Stock. New directors also receive a pro rata share of the
annual retainer for the remainder of that year, and the stock provided as part
of the annual retainer will be priced as of the date of the first meeting of the
Board at which the new director participates.
10
<PAGE> 12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table on page 11 shows the compensation for the past
three fiscal years of each of the Company's five most highly compensated
executive officers, including the Chief Executive Officer (the named executive
officers).
STOCK OPTION/STOCK APPRECIATION RIGHT GRANTS
The Company has in effect employee stock option plans pursuant to which options
to purchase Common Stock of the company and stock appreciation rights (SARs),
which are rights, granted in tandem with an option, to receive cash payments
equal to any appreciation in value of the shares subject to option from the date
of the option grant to the date of exercise in lieu of exercise of the option,
are granted to officers and other key employees of the Company and its
subsidiaries. The table on page 12 shows Options/SAR grants in fiscal 1995 to
the named executive officers. Of the stock options shown in the Summary
Compensation Table on page 11 and the Option/SAR Grant Table on page 12, 25% of
the options were options with tandem SARs. In April 1995, stock options granted
in November 1994 to foreign nationals were canceled and free-standing SARs were
issued in their place.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR AND OPTION/SAR VALUE TABLE
The table on page 12 shows information concerning the exercise of stock options
or tandem SARs during fiscal 1995 by each of the named executive officers and
the fiscal year-end value of unexercised options and SARs.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------- -------------------------
Long-Term
Fiscal Options/SARs Incentive
Name and Principal Position Year Salary($) Bonus($) (#) Payout($)
- - ---------------------------- ------ --------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
James H. Keyes 1995 731,250 599,400 30,000 363,000
Chairman and Chief Executive 1994 662,500 628,560 51,000 330,000
Officer 1993 606,246 523,438 No Grant 208,850
John M. Barth 1995 407,496 264,649 20,000 165,000
Executive Vice-President 1994 367,500 268,114 24,000 145,000
1993 329,997 246,976 No Grant 85,211
Joseph W. Lewis 1995 346,000 175,463 15,000 156,200
Executive Vice-President 1994 326,750 210,367 19,000 137,000
1993 306,504 192,294 No Grant 85,211
Stephen A. Roell 1995 302,496 200,136 15,000 79,200
Vice-President and Chief 1994 250,000 189,168 20,000 72,000
Financial Officer 1993 212,496 133,925 No Grant 27,569
John P. Kennedy 1995 248,500 144,547 7,000 78,100
Vice-President, Secretary, 1994 221,250 131,162 8,500 71,000
and General Counsel 1993 197,034 87,170 No Grant 44,276
</TABLE>
11
<PAGE> 13
OPTIONS/SAR GRANTS IN FISCAL 1995(1)
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants
- - ------------------------------------------------------------------------- Value at Assumed
% of Total Annual Rates of Stock
Options/SARs Exercise Price Appreciation
Granted to or Base for Full Option Term
Options/SARs Employees in Price Expiration ---------------------
Name Granted Fiscal 1995 ($/Share) Date 5% 10%
- - ------------------- ------------ ------------ --------- ---------- -------- ----------
OPTIONS/SARs GRANTED November 16, 1994
<S> <C> <C> <C> <C> <C> <C>
James H. Keyes 30,000 4.31% $49.3125 11/16/04 $930,371 $2,357,743
John M. Barth 20,000 2.88% $49.3125 11/16/04 $620,247 $1,571,828
Joseph W. Lewis 15,000 2.16% $49.3125 11/16/04 $465,185 $1,178,871
Stephen A. Roell 15,000 2.16% $49.3125 11/16/04 $465,185 $1,178,871
John P. Kennedy 7,000 1.01% $49.3125 11/16/04 $217,087 $ 550,140
</TABLE>
- - -------------------------
(1) The Stock Option/SAR plans are administered by the Compensation Committee of
the Board of Directors, which has authority to determine the individuals to
whom and the terms at which option and SAR grants shall be made, certain
terms of the options, and the number of shares to be subject to each
option. The per share option/SAR prices are the fair market value of the
Company's Common Stock on the date of the grant, and the term of the
options is 10 years. Fifty percent of each award is exercisable two years
after the grant, and the remainder is exercisable three years after the
grant.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Number of Unexercised In-the-Money
Shares/SARs Options/SARs at FY-End Options/SARs at FY-End
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- - ----------------------- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
James H. Keyes 25,000 $568,750 71,000 / 81,000 $1,804,000 / $909,562
John M. Barth 9,600 $262,200 20,000 / 44,000 $467,500 / $510,750
Joseph W. Lewis 12,000 $317,250 28,600 / 34,000 $734,525 / $392,625
Stephen A. Roell 4,482 $ 76,618 10,000 / 35,000 $233,750 / $402,187
John P. Kennedy 0 $ 0 15,200 / 15,500 $404,800 / $179,718
</TABLE>
12
<PAGE> 14
LONG-TERM INCENTIVE PLAN AWARDS
The following table shows each Contingent Performance Award made to any named
executive officer for the 1996 fiscal year under the Company's Long-Term
Performance Plan (LTPP). Payouts of awards are tied to the Company's weighted
average return on shareholder's equity for fiscal years 1996, 1997 and 1998
compared to the median return on shareholder's equity of the Standard & Poor's
Manufacturers (Diversified Industrial) Index (S&P index) during the same
three-year period. Performance in the third year of the award is multiplied by
3/6, performance in the second year is multiplied by 2/6, and performance in the
first year is multiplied by 1/6 to establish a weighted average. If the
Company's average level of return is: (1) less than the 45th percentile of the
return for companies in the S&P index, no award is earned; (2) equal to or
greater than the 45th percentile, the threshold amount is earned; (3) equal to
or greater than the 50th percentile, the target amount is earned; (4) equal to
or greater than the 55th percentile, 110% of the target amount is earned; and
(5) equal to or greater than the 60th percentile, the maximum amount is earned.
In fiscal 1995, based upon the data available at the time of this proxy, LTPP
participants were paid 92% of the maximum amount available under the criteria
established by the Compensation Committee. When the remaining comparison
companies have reported, these awards could increase to 100% of the maximum
amount.
<TABLE>
<CAPTION>
Amount of Performance
Contingent Period Until
Performance Maturation or Threshold Target Maximum
Name Award ($) Payout ($) ($) ($)
- - ------------------- ----------- ------------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
James H. Keyes 675,000 1996-1998 540,000 675,000 810,000
John M. Barth 249,000 Fiscal Years 199,200 249,000 298,800
Joseph W. Lewis 211,000 168,800 211,000 253,200
Stephen A. Roell 186,000 148,800 186,000 223,200
John P. Kennedy 139,000 111,200 139,000 166,800
</TABLE>
EMPLOYMENT CONTRACTS
The Company has employment agreements with each of the executive officers of the
Company including the named executive officers. These agreements provide that
employment shall continue for continuous terms, unless terminated by either the
Company or the employee as provided therein; the term of the agreements,
however, does not extend automatically after the employee reaches age 60. These
agreements
13
<PAGE> 15
provide for termination by the Company for cause, for death or disability and
under certain circumstances without cause. In the event of termination without
cause the employees under any of the contracts will be entitled to receive
benefits in an amount equal to the greater of two times the Company's
termination allowance policy for administrative employees or an amount equal to
52 weeks' earnings of the employee. In the event of termination by the Company
for cause, the employee's compensation is terminated immediately. Change of
control agreements have also been entered into by the Company with these
executives. In the event of a change of control, these agreements provide for a
severance payment equal to three times the executive's annual compensation at
the time plus a lump sum payment for the actuarial equivalent of lost benefits
under the applicable retirement plan if the executive is terminated other than
for cause or has good reason to terminate his or her employment. If the amount
to be paid upon termination exceeds certain amounts established under the
Internal Revenue Code, so as to require the payment of additional federal taxes,
the executive receives an additional payment such that, after payment by the
executive of all taxes payable in connection with the agreement, the executive
will retain the full amount of the payments to which he is entitled under the
agreement. The executive has a 30-day period at the end of the first year after
a change of control to terminate his or her employment for any reason and
receive the benefit.
The Company has in effect an Executive Survivor Benefits Plan for certain
executives. Coverage under this plan is in lieu of the Company's regular group
life insurance coverage. In the event of the death of a participating executive
while he is employed by the Company, his beneficiary is entitled to payments of
between 90% and 100% (depending on the executive's age) of the executive's final
base annual salary for a period of 10 years.
The Executive Incentive Compensation Plan (EICP) provides that, in the event of
a change of control of the Company, certain participants, including the named
executive officers, may re-elect to receive early payment of deferred amounts,
and a participant may direct the Company to cause a letter of credit be issued
in an amount sufficient to provide for all payments due to such participant
under the Plan. The Long-Term Performance Plan also provides that, in the event
of a change of control of the Company, certain participants, including the named
executive officers, shall be entitled to receive early payment of deferred
amounts.
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below is the tabulation indicating as of October 31, 1995, the shares
of the Company's Common Stock beneficially owned by each director and nominee,
each of the named executive officers, and directors and executive officers of
the Company as a
14
<PAGE> 16
group. No executive officer or director owns more than 1% of the outstanding
shares of Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
Amount and
Nature(1)
Name of of
Beneficial Owner Ownership
- - ------------------------- ----------
<S> <C>
James H. Keyes 199,464(2)(3)
John M. Barth 45,990(2)(3)
Joseph W. Lewis 122,008(2)(3)
Stephen A. Roell 28,271(2)
John P. Kennedy 24,053(2)(3)
William F. Andrews 2,155
Robert Barnett 8,125(3)
Fred L. Brengel 126,280(3)
Paul A. Brunner 5,850
<CAPTION>
Amount and
Nature(1)
Name of of
Beneficial Owner Ownership
- - ------------------------- ----------
<S> <C>
Robert A. Cornog 2,865(3)
Willie D. Davis 1,050
Southwood J. Morcott 1,856(3)(4)
Martha R. Seger 1,384(3)
Donald Taylor 3,736(3)
Richard F. Teerlink 1,078
Gilbert R. Whitaker, Jr. 4,678(3)
R. Douglas Ziegler 10,650
All directors and executive officers as a group (not including deferred shares
referred to in footnote 3 or the shares referred to in footnote 4) TOTAL
624,435(2)
TOTAL PERCENT OF CLASS 1.52%
</TABLE>
- - -------------------------
(1) Includes all shares with respect to which each officer or director directly,
through any contract, arrangement, understanding, relationship or otherwise,
has or shares the power to vote or to direct voting of such shares or to
dispose or to direct the disposition of such shares.
(2) Includes shares of Common Stock which, as of October 31, 1995, were subject
to outstanding stock options exercisable within 60 days.
(3) Includes deferred shares under the EICP, LTPP, or the Deferred Compensation
Plan for Certain Directors. Total amounts of such deferred shares include
Mr. Keyes at 40,973 shares; Mr. Barth at 3,175 shares; Mr. Lewis at 23,314
shares; Mr. Kennedy at 2,338 shares; Mr. Barnett at 6,709 shares; Mr.
Brengel at 17,203 shares; Mr. Cornog at 1,015 shares; Mr. Morcott at 762
shares; Ms. Seger at 427 shares; Mr. Taylor at 568 shares; and Mr. Whitaker
at 2,443 shares. Including deferred shares, management holds 725,972 shares,
or 1.76% of the class of common stock.
(4) Includes 300 shares acquired on November 24, 1995.
15
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Willie D. Davis, a director of the Company, is an owner of more than 10% of
Process Adhesives, from which the Company purchased approximately $169,470 of
goods during fiscal year 1995. It is not practicable to determine the amount of
his interest in the transaction.
COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION PRINCIPLES
The Company's Executive Compensation Program is based on guiding principles
designed to align executive compensation with Company values and objectives,
business strategy, management initiatives, and business financial performance.
The Johnson Controls Vision, approved by the Board of Directors, identifies
customer satisfaction, technology, growth, market leadership, and shareholder
value as the Company's primary objectives. In applying these principles the
Compensation Committee (the Committee) has established a program to:
- - - Attract and retain key executives critical to the long-term success of the
Company and each of its business groups.
- - - Reward executives for long-term strategic management and the enhancement of
shareholder value.
- - - Integrate compensation programs with both the Company's annual and long-term
strategic planning and measuring processes, which focus on after-tax return on
shareholder equity, return on investment, growth, market share, and cost
reduction.
- - - Support a performance-oriented environment that rewards performance not only
with respect to Company goals but also Company performance as compared to that
of industry performance levels.
- - - Take steps to assure that future executive compensation payments remain tax-
deductible.
EXECUTIVE COMPENSATION PROGRAM
The total compensation program involves a market comparison of total
compensation, based on surveys provided to the Company by an independent
compensation consultant. A survey of 22 companies with annual sales between $1
billion and $13 billion, comparing all elements of executive officer
compensation, including stock options and benefits, was provided by an
independent compensation consultant with respect to compensation for officers
and senior managers. Average sales of these 22 companies
16
<PAGE> 18
was $5 billion; adjustments were made to account for differences in annual sales
between the Company and those companies in the survey. The level of comparison
is the 50th percentile for total compensation.
The program consists of both cash and equity-based compensation. The annual
compensation consists of a base salary and an annual bonus under the EICP. The
Committee determines the level of salary for key executive officers and a salary
range for other executive officers. Factors considered in determining salary
amounts or ranges include prior year salary, changes in individual job
responsibilities, past performance of individuals, and, most importantly,
achievement or trends toward achievement of specified Company goals and the
salary comparison survey results. Generally, all executive officers participate
in the EICP. For each fiscal year, the Committee determines in advance and
communicates to the executive the formula for the award, which is based on
specified benchmarks for return on shareholders' equity, or return on group or
division assets, increase in market share, or cost reduction. These benchmarks
are consistent with the Company's annual and long-term strategic planning
objectives based on achievement of business plans approved by the Board of
Directors that include goals of improved performance over the previous year and
take into account industry growth and cycles. At the end of the fiscal year, the
Committee applies the formula to objective performance results to determine an
executive's award for the year. Except under the EICP Qualified Plan, where
discretionary increases to the bonus amount may no longer be made, adjustments
may then be made by the Committee, within specified ranges, for the executive's
achievement of specified objectives and individual job performance.
Long-term incentives are provided through both the LTPP and stock options. The
Committee reviews and approves the participation of executive officers of the
Company and its subsidiaries under the LTPP. Generally, all named executive
officers participate in the LTPP, which is intended to motivate executives to
achieve longer-term objectives by providing incentive compensation based on
Company performance over a three-year period. For each award under the LTPP, the
Committee assigns an executive a contingent performance award, which the
executive has the opportunity to earn based upon the Company's return on equity
during the specified three-year period. Currently, LTPP awards are based upon a
specified level of return on shareholders' equity relative to the Standard &
Poor's Manufacturers (Diversified Industrial) Index median return on
shareholders' equity. The specified level of return is consistent with the
Company's strategic planning objectives. At the end of the period, the Committee
applies the specified goal to objective performance results to determine the
executive's LTPP award.
17
<PAGE> 19
The Committee grants stock options and stock appreciation rights (SARs) under
the 1992 Stock Option Plans. The Committee has the authority to determine the
individuals to whom stock options and SARs are awarded, the terms at which
option grants shall be made, the terms of the options, and the number of shares
subject to each option. Compensation to executives through stock options and
SARs and the LTPP, taken together, is targeted at the 50th percentile of such
compensation granted by similar companies as identified in the survey. Current
stock ownership by executives, the number of unexercised options that may be
outstanding for an executive or executives as a whole, and other factors may be
considered only for new or promoted officers. Through the award of stock option
grants, the objective of aligning executive officers' long-range interests with
those of the shareholders is met by providing the executive officers with the
opportunity to build a meaningful stake in the Company.
Executive officers may also participate in the Company's Savings and Investment
Plan (401k Plan), which includes Company contributions to the Plan, an
Equalization Benefit Plan under which certain executives, including the named
executive officers, are entitled to additional benefits that cannot be paid
under qualified plans due to Internal Revenue Code limitations and in addition
other benefit plans generally available to all levels of salaried employees.
Also, certain executive officers may elect to defer certain awards or
compensation under plans. Deferred awards are accounted for as if invested in
various accounts.
The Board of Directors has adopted an Executive Stock Ownership Policy, which
requires that all officers and senior managers in each business group, within
five years of becoming subject to the Policy, hold Common Stock of the Company
in an amount, depending upon the officer or manager, of one to three times their
annual salary. Total compensation to be received by these individuals is not
affected by the policy. To facilitate the acquisition of Common Stock by
executives subject to the Executive Stock Ownership Policy, the Board of
Directors has adopted, subject to shareholder approval at the January 24, 1996
Annual Meeting, a Common Stock Purchase Plan for Executives (CSPPE). All
officers and key executives may participate in the CSPPE. Participants in the
CSPPE may deduct from their pay up to a maximum of $2,500 per month to purchase
shares of the Company's Common Stock. The price of each share of such stock will
be 100% of the average price of shares purchased by Firstar Trust Company as
agent for the participants. No brokerage fees or commissions will be charged,
and the Company will bear the expenses of administering the CSPPE.
Approximately 50% of the total compensation paid in the executive officer group
is performance related, which is comparable to the average of the companies
identified in the executive compensation survey.
18
<PAGE> 20
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee relied on the same approach in determining the Chief Executive
Officer's compensation as it used for compensation of other executive officers.
The Chief Executive Officer of the Company received a base salary in fiscal 1995
of $750,000, which represented an increase of 11% over the previous year. The
Chief Executive Officer's base salary remained below the average base salary for
chief executive officers for the 22 companies reviewed. His fiscal 1995 EICP
award of $599,400 was based upon the return on shareholder's equity for the
Company for fiscal 1995 and represented 52.1% of the maximum amount available
under the criteria established by the Committee. In fiscal 1995, the Chief
Executive Officer received payments under the LTPP of $363,000, based upon the
Company's return on shareholder's equity over the past three fiscal years, and
it represented 92% of the maximum amount available under the criteria
established by the Committee based upon the data available on the date of this
proxy. When the remaining comparison companies have reported, this award could
subsequently increase to 100% of the maximum amount. Stock options were awarded
in November 1994, when the Chief Executive Officer received an option award of
30,000 shares.
Approximately 70% of the total compensation paid to the Chief Executive Officer
is performance related, which is comparable to the average for the companies
identified in the survey.
COMPENSATION COMMITTEE
Donald Taylor, Chairman
William F. Andrews
Paul A. Brunner
Southwood J. Morcott
19
<PAGE> 21
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on the market price of the Common
Stock and assuming reinvestment of dividends, with the cumulative total return
of companies on the Standard & Poor's 500 Stock Index and the S&P Manufacturers
(Diversified Industrial) Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG S&P 500 INDEX, S&P MANUFACTURERS (DIVERSIFIED
INDUSTRIAL) INDEX AND JOHNSON CONTROLS, INC.
<TABLE>
<CAPTION>
Manufacturers
Measurement Period (Diversified
(Fiscal Year Covered) S&P 500 Industrial) JCI
--------------------- ------- ------------- ---
<S> <C> <C> <C>
1990 100.0 100.0 100.0
1991 131.2 131.0 175.7
1992 145.7 137.7 217.8
1993 164.6 163.2 305.4
1994 170.7 181.3 287.2
1995 221.4 241.5 375.7
</TABLE>
ASSUMES $100 INVESTED ON SEPTEMBER 30, 1990, IN S&P 500 INDEX
S&P MANUFACTURERS (DIVERSIFIED INDUSTRIAL) INDEX AND JOHNSON CONTROLS, INC.,
AND THAT DIVIDENDS ARE REINVESTED AT THE END OF MONTH IN WHICH THEY ARE PAID.
20
<PAGE> 22
PENSION PLANS
PENSION PLAN TABLE
The following table shows the maximum annual retirement benefits payable in
dollars under the Company's plans (including amounts attributable to the
Company's Equalization Benefit Plan) at the normal retirement age for specified
remunerations and years of service under provisions in effect on September 30,
1995, and assuming retirement on that date. Compensation for purposes of the
plans for the named executive officers generally corresponds with the aggregate
of the earned salary, plus bonus or Executive Incentive Compensation Plan awards
for each such person.
<TABLE>
<CAPTION>
Maximum Annual Pension at Normal Retirement Age
After Years of Participating Service
Average Annual (Prior to Adjustment for Social Security
Compensation in Highest Covered Compensation)
5 Years of Last 10 Years -----------------------------------------------
Before Retirement 25 Years 30 Years 35 Years 40 Years
- - ------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 100,000 42,500 51,000 56,750 62,500
$ 200,000 85,000 102,000 113,500 125,000
$ 250,000 106,250 127,500 141,875 156,250
$ 300,000 127,500 153,000 170,250 187,500
$ 400,000 170,000 204,000 227,000 250,000
$ 500,000 212,500 255,000 283,750 312,500
$ 600,000 255,000 306,000 340,500 375,000
$ 700,000 297,500 357,000 397,250 437,500
$ 800,000 340,000 408,000 454,000 500,000
$ 900,000 382,500 459,000 510,750 562,500
$1,000,000 424,992 509,988 567,492 624,996
$1,100,000 467,496 561,000 624,252 687,492
</TABLE>
As of September 30, 1995, the persons named in the Summary Compensation Table
were credited with the following years of service under the Company's pension
plan: Mr. Keyes, 26 years; Mr. Barth, 25 years; Mr. Lewis, 34 years; Mr. Roell,
12 years; and Mr. Kennedy, 10 years.
Pension plans of the Company generally apply to all regular employees, including
officers of the Company. The Johnson Controls Pension Plan (the Plan), effective
January 1, 1989, generally covers all salaried and non-union hourly employees of
the Company. The Plan has been amended from time to time. Under the Plan,
benefits are accrued according to the following formula: 1.15% of Participant's
Average Monthly Compensation multiplied by the Participant's years of Benefit
Service plus 0.55% of Average Monthly Compensation in excess of the
Participant's Covered Compensation
21
<PAGE> 23
multiplied by the Participant's years of Benefit Service. The amounts actually
payable may be actuarially adjusted to reflect the Participant's marital status,
early retirement or termination, and, in some circumstances, age. "Average
Monthly Compensation" is defined as the average monthly compensation for the
highest five consecutive years in the last 10 years. "Benefit Service" generally
means the number of years worked for the Company. "Covered Compensation" means
the average of compensation subject to Social Security taxes for the 35-year
period ending in the year the Participant attains Social Security Retirement
Age; i.e. the age at which the Participant will be entitled to full Social
Security payments.
Participants become entitled to benefits under the Plan after five years of
service with the Company or any of its subsidiaries, and the normal retirement
date is a Participant's 65th birthday.
The Internal Revenue Code places maximum limitations on the amount of benefits
that may be paid under the Plan. The Company has adopted an Equalization Benefit
Plan under which certain executives, including the named executive officers, are
entitled to the additional pension benefits that cannot be paid under the
qualified plan due to these limitations and because they have elected to defer a
portion of their award under an incentive compensation plan.
COMPENSATION PLANS SUBJECT TO SHAREHOLDER APPROVAL
The Board of Directors has adopted, subject to shareholder approval and
ratification, a new 1995 Common Stock Purchase Plan for Executives (CSPPE) and
it has amended the 1992 Stock Option Plan. The original 1992 Stock Option Plan
was approved and ratified by the shareholders at the 1993 Annual Meeting.
PROPOSED COMMON STOCK PURCHASE PLAN FOR EXECUTIVES (CSPPE)
Under the Common Stock Purchase Plan for Executives (CSPPE), all officers and
key executives of the Company are eligible to deduct from their pay a maximum of
$2,500 per month to purchase shares of the Company's Common Stock. The purpose
of the CSPPE is to facilitate the acquisition of Company Common Stock by those
officers and executives subject to the Executive Stock Ownership Policy
previously adopted by the Board of Directors. The Executive Stock Ownership
Policy requires all officers and senior managers in each of the Company's
business groups to hold, within five years of becoming subject to the policy,
Common Stock in the Company in an amount, depending on the officer or manager,
one to three times their annual salary.
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<PAGE> 24
The full text of the CSPPE is set forth in Exhibit A attached hereto. Major
provisions of the CSPPE include the following:
(A) Participants in the CSPPE may deduct up to a maximum of $2,500 per
month from their pay to purchase shares of the Company's Common Stock.
(B) All officers and key executives of the Company or a subsidiary that are
subject to the Company's Executive Stock Ownership Policy may
participate in the CSPPE. As of December 1, 1995, the number of such
officers and key executives totalled 38.
(C) The Company's transfer agent and registrar, Firstar Trust Company, is
responsible for administration of the Plan, subject to the supervision
and control of the Compensation Committee of the Board of Directors of
the Company.
(D) The price of each share of Common Stock purchased under the CSPPE shall
be 100% of the average price of the share purchased by Firstar Trust
Company as agent for the Participants. No brokerage fee or commission
shall be charged.
(E) Except for a Participant's initial election to purchase shares under
the CSPPE, the purchase of shares by a Participant pursuant to a
payroll deduction, an increase of amounts deducted from pay, the
termination of payroll deductions, the sale of shares, or the closure
of the account shall be made only pursuant to an irrevocable election
made by the Participant at least six months in advance of the
designated transaction. Participants that terminate payroll deductions,
sell shares, or close accounts shall be prohibited from participating
in the CSPPE until six months after such transaction.
(F) The Company shall bear the expenses of administering the CSPPE.
(G) The CSPPE shall terminate as of September 30, 2000.
Because participation in the CSPPE is voluntary and benefits of participation
relate primarily to the ability to acquire Common Stock without paying
commissions, the Company cannot determine the benefits that will accrue under
the CSPPE to the named executive officers, other executive officers or other
employees. Directors of the Company who are not employees are not eligible to
participate in the CSPPE.
The affirmative vote of a majority of the votes cast on the proposal by
shareholders of the Company's Common Stock and Preferred Stock units is required
for approval and ratification of the Company's Common Stock Purchase Plan for
Executives (CSPPE), provided that a majority of the outstanding shares of the
Company's Common Stock
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<PAGE> 25
and Preferred Stock are voted on the proposal. For purposes of determining the
vote regarding this proposal, abstentions will have the effect of a vote against
the proposal (but will not be counted as votes cast with respect to the proposal
for purposes of determining whether a majority of the outstanding shares were
voted), and broker nonvotes will have no impact on the vote.
Proxies solicited by the Board of Directors will be voted "FOR" approval and
ratification of the proposed 1995 Common Stock Purchase Plan for Executives
(CSPPE) unless a shareholder specified otherwise.
PROPOSED AMENDMENTS TO 1992 STOCK OPTION PLAN.
The 1992 Stock Option Plan (Stock Option Plan) was approved and ratified by the
shareholders at the 1993 annual meeting. The Stock Option Plan is intended to
provide Stock Options (Options) and Stock Appreciation Rights ("SARs") to induce
certain officers and other key employees to remain in the employ of the Company
or its subsidiaries and to encourage such employees to secure or increase on
reasonable terms their stock ownership in the Company. The Board of Directors
has adopted, subject to shareholder approval and ratification, the following
four amendments to the Stock Option Plan:
(A) Article 4 has been amended so that the maximum number of shares of the
Company's Common Stock that may be subject to option under the Stock Option
Plan has been increased from 2,000,000 shares to 4,000,000 shares. An
increased number of shares is required due to the extension of the Stock
Option Plan to a larger number of employees;
(B) Article 6 has been amended so that the maximum number of shares of Common
Stock covered by Options which may be granted to any Participant within any
two consecutive calendar year periods shall not exceed 250,000 shares in the
aggregate. This amendment has been made in order to meet requirements of the
Internal Revenue Code to maintain tax deductibility of the Stock Option Plan
for the Company;
(C) Article 16 has been deleted in its entirety from the Stock Option Plan. The
deleted Article provided as follows:
ADDITIONAL OPTIONS. The Compensation Committee shall have the authority to
include in any Option Agreement a provision entitling the Participant to an
additional Option in the event such Participant exercises the Option
represented by the Option Agreement, in whole or in part, by delivering
previously owned whole shares of Common Stock in payment of the Option
price. Any such
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<PAGE> 26
additional Option shall be for a number of shares of Common Stock equal to
the number of delivered shares, shall have an Option price determined by
the Committee in accordance with Paragraph 9, shall be exercisable on the
terms and subject to the conditions established by the Committee at the
time of grant of such additional Option, and shall be subject to such
other terms and conditions as the Committee shall determine in accordance
with this Plan.
(D) Article 17(c) has been amended so that the period during which a Participant
may exercise an Option or SAR after the date of a Participant's termination
of employment due to early or normal retirement or total permanent
disability prior to the expiration of the Option or SAR has been extended
from 12 months to 36 months.
The Board of Directors believes that the Plan will promote continuity of
management and increased incentive and personal interest in the welfare of the
Company by those who are responsible for shaping and carrying out the long-range
plans of the Company and securing its continued growth and financial success.
The text of the proposed amendments to the Stock Option Plan is set forth in
Exhibit B attached hereto. The major provisions of the 1992 Stock Option Plan,
with specific mention of the four proposed amendments, include the following:
(A) A maximum of 4,000,000 shares of the Common Stock of the Company may be
subject to option under the Stock Option Plan, subject to adjustment in the
event of stock dividend, stock split or similar change in outstanding
shares. The Stock Option Plan approved and ratified by the shareholders at
the 1993 annual meeting provided for a maximum of 2,000,000 shares and the
Board of Directors, subject to shareholder approval and ratification at the
1996 annual meeting, has increased the maximum number to 4,000,000.
(B) Employees eligible to receive Options and SARs will be officers and other
key employees of the Company and its subsidiaries, including the named
executive officers, (the "Participants"). No Option or SAR shall be granted
to any person who owns directly or indirectly shares of stock possessing
more than 10 percent of the total combined voting power of all classes of
stock of the Company. A director of the Company or of a subsidiary who is
not also an employee of the Company or of a subsidiary will not be eligible
to receive any Option or SAR under the Stock Option Plan. The Board of
Directors, subject to shareholder approval and ratification at the 1996
annual meeting, has amended the Stock Option Plan so that the maximum number
of shares of Common Stock covered by the Options which may be granted to any
Participant within any two consecutive calendar year periods shall not
exceed 250,000 in the aggregate.
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<PAGE> 27
(C) The per share Option price, as determined by the Compensation Committee of
the Board of Directors (the "Committee"), shall be an amount not less than
100 percent of the fair market value of the stock on the date such Option is
granted. The consideration received by the Company for the award of an
Option includes the continued service of the Participant.
(D) The term of each Option shall be as determined by the Committee, but in no
event shall the term of an Option exceed a period of 10 years from the date
of its grant. The Option will terminate immediately upon termination of
employment other than by reason of early or normal retirement, death or
total and permanent disability. Unless the Option expires earlier under the
terms of the Participant's Option Agreement, Options may be exercised within
12 months after termination of employment by reason of early or normal
retirement, death, or total and permanent disability. The Board of
Directors, subject to shareholder approval and ratification at the 1996
annual meeting, has extended the exercise period in the previous sentence
from 12 months to 36 months in the event the termination of employment is
due to early or normal retirement or total and permanent disability.
(E) Options may not be granted after September 22, 2002, at which time the Stock
Option Plan will terminate. The Stock Option Plan may be amended or
terminated earlier by the Board of Directors, but the consent of the
Participants is required for any amendment or termination which would
adversely affect outstanding options. The approval of shareholders is
required for any modifications for which approval is required to assure
conformity with applicable law.
(F) Options may not be transferred during the Participant's lifetime other than
pursuant to a qualified domestic relations order.
(G) No Option shall be exercisable for a period of at least six months
commencing on the date of grant except under certain conditions in the event
of a change in control of the Company.
(H) Payment of the Option price may be made in cash or, if permitted by the
applicable Option Agreement, by delivery of shares of common stock
equivalent in fair market value, or if permitted by the applicable Option
Agreement, partly in cash and partly in shares of common stock.
(I) The Board of Directors, subject to shareholder approval and ratification at
the 1996 annual meeting, has deleted a provision that had provided the
Committee with the authority to include in any Option Agreement a provision
entitling the Participant to an additional Option in the event the
participant exercised an Option by delivering previously owned shares of
common stock in payment of the Option
26
<PAGE> 28
price. Under the terms of that provision, any such additional Option would
have been for a number of shares equal to the number of delivered shares,
would have had an Option price determined by the Committee of not less than
100 percent of the fair market value on the date the Option is granted, and
would have been exercisable on the terms and conditions established by the
Committee at the time of the grant and in accordance with the Stock Option
Plan.
(J) A Participant may, if permitted by the applicable Option Agreement, satisfy
the Company's withholding tax requirements by electing to have the Company
withhold shares of Common Stock otherwise issuable under the Option or to
deliver to the Company shares of Common Stock having a fair market value on
the date income is recognized on the exercise of a nonstatutory Option equal
to the minimum amount required to be withheld, or such greater amount as may
be requested by the Participant. The Committee shall establish rules
governing such withholding elections, and such elections shall be made at
such times as required to conform with applicable securities laws.
(K) The Stock Option Plan will be administered by the Committee. The Committee
will have complete authority to establish rules and regulations for the
administration of the Stock Option Plan and to determine the individuals to
whom, and the time or times at which Options or SAR's shall be granted, the
types of Options, the Option periods, limitations on exercise and the number
of shares to be subject to each Option.
(L) Certain Options issued under the Stock Option Plan are intended to be
Incentive Stock Options ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code, as amended, (the "Code") and the remainder of the
Options issued pursuant to the Plan shall constitute nonstatutory Options.
(M) The aggregate fair market value of the stock for which an ISO is exercisable
for the first time by a Participant during any calendar year under the Stock
Option Plan or any other plan of the Company or any subsidiary shall not
exceed $100,000. To the extent the fair market value of the shares of stock
attributable to ISOs first exercisable in any calendar year exceeds
$100,000, the excess portion of the ISO shall be treated as non-statutory
Options.
(N) The Stock Option Plan provides that SARs may be granted in conjunction with
all or part of any Option granted under the Plan. SARs will be exercisable
or transferable at such time or times and only to the extent that the Option
to which they relate is exercisable or transferable. SAR's entitle the
participant to receive any increase in the market value of the stock subject
to the Option between the date of the Option grant and the date of exercise,
and are exercised in lieu of exercising the Option with respect to such
stock. The Committee shall have the
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<PAGE> 29
sole discretion to determine the medium of payment of the economic value
of the SARs (i.e., cash, stock, or any combination thereof) or to consent
to or disapprove the election of the Participant to receive cash in full
or partial payment. If SARs are granted, the Company must recognize as a
compensation expense, and charge against earnings, an amount equal to the
amount of appreciation, if any, of the value of its stock over the
exercise price as the appreciation occurs.
(O) The Options will become immediately exercisable in the event of certain
changes of control of the Company ("Change of Control"). Also, during the
60-day period from and after a Change of Control, each Participant shall
have the right to elect to surrender all or part of the Option and to
receive in lieu thereof cash in the amount by which the value per share on
the date of such election exceeds the Option price per share ("LSARs"). The
value of the share is determined by the highest reported sales price of a
share during the 60-day period prior to the Change of Control.
The Company cannot now determine the number of Options to be received by all
current executive officers as a group and all other key employees as a group. In
fiscal 1995, however, approximately 741 employees received option grants under
the current Stock Option Plan. The number of such Options shall be determined by
the Committee pursuant to the terms of the Stock Option Plan.
The following table shows the number of fiscal 1996 Options granted on November
15, 1995 under the Stock Option Plan to the named executive officers, all
executive officers as a group, and all employees as a group. The Options were
granted at an exercise price of $63.6875/share. The closing price of a share of
Common Stock on the New York Stock Exchange on December 1, 1995, was $68.50.
Options granted under the Stock Option Plan to the named executive officers
during fiscal 1995 are disclosed in the Summary Compensation Table.
FISCAL 1996 OPTIONS
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
GRANTED ON
NAME NOVEMBER 15, 1995
- - --------------------------------------------------------------- -----------------
<S> <C>
James H. Keyes................................................. 40,000
John M. Barth.................................................. 24,000
Joseph W. Lewis................................................ 17,000
Stephen A. Roell............................................... 17,000
John P. Kennedy................................................ 12,000
All Executive Officers as a Group (19 persons)................. 205,100
All Employees as a Group....................................... 760,465
</TABLE>
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<PAGE> 30
Directors and other persons who are not employees of the Company and who are not
engaged to become employees of the Company are not eligible to receive Options
under the Stock Option Plan.
FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND THE OPTIONEE
Incentive Stock Options. Options granted under the Stock Option Plan which
constitute ISOs will, in general, be subject to the following Federal income tax
treatment:
i) The grant of an ISO will give rise to no Federal income tax
consequences to either the Company or the Participant.
ii) A Participant's exercise of an ISO will result in no Federal income
tax consequences to the Company.
iii) A Participant's exercise of an ISO will not result in ordinary Federal
taxable income to the Participant, but may result in the imposition of
or an increase in alternative minimum tax. If shares acquired upon
exercise of an ISO are not disposed of within the same taxable year of
the ISO exercise, the excess of the fair market value of the shares at
the time the ISO is exercised over the option price in included in the
Participant's computation of alternative minimum taxable income.
iv) If shares acquired upon the exercise of an ISO are disposed of within
two years of the date of the option grant, or within one year of the
date of the option exercise, the Participant will realize ordinary
Federal taxable income at the time of the disposition to the extent
that the fair market value of the shares at the time of exercise
exceeds the option price, but not in an amount greater than the excess,
if any, of the amount realized on the disposition over the option
price.
Short-term or long-term capital gain will be realized by the
Participant at the time of such a disposition to the extent that the
amount of proceeds from the sale exceeds the fair market value at the
time of the exercise of the ISO.
Short-term or long-term capital loss will be realized by the
Participant at the time of such a dispositon to the extent that the
option price exceeds the amount of proceeds from the sale.
If a disposition is made as described in this section, the Company will
be entitled to a Federal income tax deduction in the taxable year in
which the disposition is made in an amount equal to the amount of
ordinary Federal taxable income realized by the Participant.
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<PAGE> 31
v) If shares acquired upon the exercise of an ISO are disposed of after
the later of two years from the date of the option grant or one year
from the date of the option exercise, the Participant will realize
long-term capital gain or loss in an amount equal to the difference
between the amount realized by the Participant on the disposition and
the Participant's Federal income tax basis in the shares, usually the
option price. In such event, the Company will not be entitled to any
Federal income tax deduction with respect to the ISO.
Nonstatutory Stock Options. Options granted under the Stock Option Plan which do
not qualify as ISOs ("nonstatutory options") will, in general, be subject to the
following Federal income tax treatment:
i) The grant of a nonstatutory option will give rise to no Federal income
tax consequences to either the Company or the Participant.
ii) The exercise of a nonstatutory option will generally result in
ordinary Federal taxable income to the Participant in the amount equal
to the excess of the fair market value of the shares at the time of
exercise over the option price. A deduction from Federal taxable
income will be allowed to the Company in an amount equal to the amount
of ordinary income recognized by the Participant, provided the Company
deducts and withholds all appropriate Federal withholding tax.
iii) Upon a subsequent disposition of shares, a Participant will recognize
a short-term or long-term capital gain (or loss) equal to the
difference between the amount received and the tax basis of the
shares, usually fair market value at the time of exercise.
Stock Appreciation Rights. Any SARs which may be granted in conjunction with all
or part of any option granted under the Stock Option Plan, including LSARs, will
be subject to the following Federal income tax treatment:
i) The grant of a SAR or LSAR will give rise to no Federal income tax
consequences to either the Company or the Participant.
ii) Upon the exercise of a SAR or LSAR, the economic value received by the
Participant, the excess of the fair market value of the shares on the
date of the exercise over the option price, will be taxable to the
Participant as ordinary Federal taxable income. The Company will
receive a Federal income tax deduction in an amount equal to the
income realized by the Participant.
The Federal income tax consequences described in this section are based on laws
and regulations in effect on October 31, 1995, and future changes in those laws
and
30
<PAGE> 32
regulations may affect the tax consequences described herein. No discussion of
state income tax treatment has been included.
The affirmative vote of a majority of the votes cast on the proposal by
shareholders of the Company's Common Stock and Preferred Stock units is required
for approval and ratification of the amendments to Stock Option Plan, provided
that a majority of the outstanding shares of the Company's Common Stock and
Preferred Stock are voted on the proposal. For purposes of determining the vote
regarding this proposal, abstentions will have the effect of a vote against the
proposal (but will not be counted as votes cast with respect to the proposal for
purposes of determining whether a majority of the outstanding shares were
voted), and broker nonvotes will have no impact on the vote.
Proxies solicited by the Board of Directors will be voted "FOR" approval and
ratification of the proposed amendments to the 1992 Stock Option Plan unless a
shareholder specified otherwise.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten-percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by the Company,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, since October 1, 1994,
all filing requirements applicable to its officers, directors, and greater than
ten-percent beneficial owners were complied with.
SELECTION OF AUDITORS
Management will propose the adoption of a resolution ratifying the Board of
Directors' decision to appoint Price Waterhouse as auditors. If the shareholders
fail to ratify such selection, the Board will reconsider it. Representatives of
Price Waterhouse are expected to be present at the shareholders' meeting with
the opportunity to make a statement if they desire to do so and to be available
to respond to appropriate questions.
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<PAGE> 33
SHAREHOLDERS' PROPOSALS
Proposals of shareholders which are intended to be presented at the 1997 annual
meeting must be received by the Company no later than August 18, 1996, to be
included in the Company's proxy materials for that meeting. Further, a
shareholder who otherwise intends to present business at the 1997 annual meeting
must comply with the requirements set forth in the Company's By-Laws. Among
other things, to bring business before an annual meeting, a shareholder must
give written notice thereof, complying with the By-Laws, to the Secretary of the
Company not less than 60 days and not more than 90 days prior to the fourth
Tuesday of the month of January. The 1997 annual meeting will be held on January
22, 1997, or on such other date designated by the Board of Directors.
OTHER MATTERS
The matters referred to in the notice of meeting and in the proxy statement are,
as far as management now knows, the only matters which will be presented for
consideration at the meeting. If any other matters properly come before the
meeting, the persons named in the accompanying form of proxy will vote on them
in accordance with their best judgment.
The cost of soliciting proxies will be borne by the Company. The Company expects
to solicit proxies primarily by mail. Proxies also may be solicited personally
and by telephone by certain officers and regular employees of the Company. D.F.
King & Co., Inc., has been retained for solicitation of all brokers and nominees
at a cost of approximately $11,000 plus customary out-of-pocket expenses. The
Company may reimburse brokers and other nominees for their expenses in
communicating with the persons for whom they hold stock of the Company.
The Company's 1995 Annual Report has already been mailed to the shareholders.
JOHNSON CONTROLS, INC.
John P. Kennedy, Secretary
December 20, 1995
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<PAGE> 34
EXHIBIT A
COMMON STOCK PURCHASE PLAN FOR EXECUTIVES
SECTION 1
PURPOSE
The purpose of this Plan is to facilitate the acquisition of Company shares by
those executives subject to the Executive Stock Ownership Policy previously
adopted by the Board of Directors and as amended from time to time.
SECTION 2
EFFECTIVE DATE AND TERMINATION DATE
2.1 The Plan shall be effective as of October 1, 1995. The Plan is subject to
Shareholder approval at the Annual Meeting of Shareholders of the Company on
January 24, 1996. If the shareholders do not approve the Plan at that time,
then all amounts contributed by Participants will be returned to the
Participants, without interest or credit for gains or losses on shares
purchased or sold under the Plan.
2.2 The Plan shall terminate as of September 30, 2000.
SECTION 3
DEFINITIONS
3.1 The "Company" is Johnson Controls, Inc., a Wisconsin corporation, and any
successor thereto that adopts the Plan.
3.2 The "Plan" is the Johnson Controls, Inc. Common Stock Purchase Plan for
Executives adopted on September 27, 1995, by the Board of Directors of the
Company.
3.3 The "Board" is the Board of Directors of the Company.
3.4 A "Participant" is an officer or key executive of the Company or a
subsidiary who has elected to participate in the Plan.
SECTION 4
ELIGIBILITY
All officers and key executives of the Company or a subsidiary subject to the
Company's Executive Stock Ownership Policy may participate in the Plan. All
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<PAGE> 35
other employees of the Company who reside in the United States, Canada, or
Puerto Rico and have reached the age of majority in their states may participate
in the Company's Common Stock Purchase Plan without complying with the
requirements of this Plan.
SECTION 5
ADMINISTRATION
5.1 Administration of the Plan, except as otherwise provided herein, shall be
the same as, and shall be conducted as part of, the administration of the
Common Stock Purchase Plan for the Company, as set forth in JCI Publication
8777 (Rev. 3/93). The Company's transfer agent and registrar, Firstar Trust
Company, is responsible for the administration of the Plan, subject to the
supervision and control of the Compensation Committee of the Board of
Directors of the Company.
5.2 Prior to participating in the Plan, a Participant shall enter into a written
agreement with the Company in which the Participant shall agree that any
derivative security related to the Plan shall not be transferable other than
by will or descent or pursuant to a qualified domestic relations order.
5.3 The price of each share of the Company's Common Stock purchased under the
Plan shall be 100% of the average price of shares purchased by Firstar Trust
Company as agent for the Participants. No brokerage fee or commission shall
be charged. Funds representing cash dividends (both on stock held in the
name of the Participant and on any full or fractional shares held under the
Plan) will be applied to the purchase of Common Stock of the Company under
the Plan on the cash dividend payment date or as soon as practicable
thereafter, in the same manner as under the Common Stock Purchase Plan.
5.4 Except for a Participant's initial election to purchase shares under the
Plan, the purchase of shares by a Participant pursuant to payroll deduction,
an increase of amounts deducted from pay, the termination of payroll
deductions, the sale of shares, or the closure of the account shall be made
only pursuant to an irrevocable election made by the Participant at least
six months in advance of the designated transaction.
5.5 Participants that terminate payroll deductions, sell shares, or close
accounts shall be prohibited from participating again in the Plan until six
months after such transaction.
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<PAGE> 36
5.6 The maximum amount that may be deducted from a Participant's pay each month
shall be $2,500.
5.7 The Company shall bear the expenses of administering the Plan.
5.8 The Board of Directors of the Company may amend the Plan from time to time;
however, any amendments requiring approval of the shareholders of the
Company pursuant to Rule 16b-3 of the Securities and Exchange Act of 1934
shall be effective only upon such shareholder approval.
5.9 This Plan shall be construed, administered and governed in all respects in
accordance with the laws of the State of Wisconsin.
5.10 Except when otherwise indicated by the context, any masculine terminology
used herein shall also include the feminine gender, and the definition of
any term herein in the singular shall also include the plural.
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<PAGE> 37
EXHIBIT B
RESOLVED, that the shareholders of Johnson Controls, Inc. (the Company) hereby
approve and ratify the amendments to the Johnson Controls, Inc. 1992 Stock
Option Plan (Stock Option Plan), adopted by the Board of Directors of the
Company on September 27, 1995. The amendments are as follows:
(A) Article 4 of the Stock Option Plan has been amended so that the maximum
number of shares of the Company's Common Stock which may be issued or
delivered upon exercise of options to be granted under the Stock Option Plan
is increased from 2,000,000 shares to 4,000,000 shares so that the aggregate
number of shares authorized to be issued or transferred from the treasury of
the Company under the Stock Option Plan shall be 4,000,000 shares including
the number of shares originally authorized for issuance under the Stock
Option Plan.
(B) Article 6 of the Stock Option Plan has been amended so that the maximum
number of shares of Common Stock covered by Options which may be granted to
any Participant within any two consecutive calendar year period shall not
exceed 250,000 in the aggregate.
(C) Article 16 of the Stock Option Plan has been deleted in its entirety. That
Article provided as follows:
ADDITIONAL OPTIONS. The (Compensation) Committee shall have the authority to
include in any Option Agreement a provision entitling the Participant to an
additional Option in the event such Participant exercises the Option
represented by the Option Agreement, in whole or in part, by delivering
previously owned whole shares of Common Stock in payment of the Option
price. Any such additional Option shall be for a number of shares of Common
Stock equal to the number of delivered shares, shall have an Option price
determined by the Committee in accordance with Paragraph 9, shall be
exercisable on the terms and subject to the conditions established by the
Committee at the time of grant of such additional Option, and shall be
subject to such other terms and conditions as the Committee shall determine
in accordance with this Plan.
(D) Article 17(c) of the Stock Option Plan has been amended so that the period
during which a Participant in the Stock Option Plan may exercise an Option
or stock appreciation right (SAR) after the date of that Participant's early
or normal retirement or total permanent disability prior to the expiration
of the option or SAR is extended from 12 to 36 months.
<PAGE> 38
Johnson Controls, Inc., P.O. Box 591, Milwaukee, WI 53201
Shareholder's Proxy Annual Meeting - January 24, 1996
The undersigned, having received the Notice of Meeting and Proxy Statement
dated December 20, 1995, and Annual Report for 1995, hereby appoints J.P.
Kennedy and J.H. Keyes, and each of them, proxies with power of substitution to
vote for the undersigned at the annual shareholders' meeting of Johnson
Controls, Inc., on January 24, 1996, and at any adjournments thereof, as
follows:
The Board of Directors recommends a vote FOR Items 1, 2, 3, and 4. If no
direction is made, this proxy will be voted FOR all nominees listed and
FOR Items 2, 3, and 4.
(1) ELECTION OF DIRECTORS / / FOR all nominees listed (except as
indicated to the contrary below.)
/ / WITHHOLD AUTHORITY to
vote for all nominees
listed.
FRED L. BRENGEL, ROBERT A. CORNOG, JAMES H. KEYES, AND R. DOUGLAS
ZIEGLER
INSTRUCTION: To withhold authority to vote for any indicated nominee,
write the nominee's name below.
------------------------------------------------------------------------
(2) Ratification of the appointment of Price Waterhouse as auditors.
FOR / / AGAINST / / ABSTAIN / /
(3) Ratification of the JCI 1995 Common Stock Purchase Plan for
Executives (CSPPE).
FOR / / AGAINST / / ABSTAIN / /
(4) Ratification of amendments to the JCI 1992 Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
(5) In their discretion, upon any other matters which may properly come
before the meeting or any adjournments, thereof, hereby revoking any
proxy heretofore given by the undersigned for such meeting.
(To be signed on other side)
<PAGE> 39
PROXY NO. (Continued from reverse side) NO. OF SHARES
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED THEREIN
BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED AND FOR PROPOSALS 2, 3, AND 4.
Signed ________________________________
________________________________
Dated __________________________ , 19__
Please sign name exactly as it appears
hereon. When signed as attorney,
executor, trustee or guardian, please
add title. For joint accounts, each
owner should sign.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF JOHNSON CONTROLS, INC.
2
<PAGE> 40
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Johnson Controls, Inc. NOTICE OF 1996
Post Office Box 591 ANNUAL MEETING OF
Milwaukee, Wisconsin 53201 SHAREHOLDERS AND
Tel: 414/228 1200 PROXY STATEMENT
