<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 1-5097
JOHNSON CONTROLS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-0380010
(State of Incorporation) (I.R.S. Employer
Identification No.)
5757 North Green Bay Avenue, P.O. Box 591, Milwaukee, WI 53201
(Address of principal executive office)
Registrant's telephone number, including area code (414) 228-1200
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 ______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1995
----- ----------------------------
Common Stock $.16 2/3 Par Value 40,937,566
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JOHNSON CONTROLS, INC.
FORM 10-Q
JUNE 30, 1995
REPORT INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. - FINANCIAL INFORMATION:
Consolidated Statement of Financial Position
at June 30, 1995, September 30, 1994 and
June 30, 1994 ............................................. 3
Consolidated Statement of Income for the Three and
Nine-Month Periods Ended June 30, 1995 and 1994 ............ 4
Consolidated Statement of Cash Flows for the Nine-
Month Periods Ended June 30, 1995 and 1994 ................ 5
Notes to Consolidated Financial Statements .................. 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 8
PART II. - OTHER INFORMATION:
Item 1. Legal Proceedings ................................... 13
Item 4. Results of Votes of Security Holders ................ 14
Item 5. Other Information ................................... 14
Item 6. Exhibits and Reports on Form 8-K .................... 15
SIGNATURES ............................................................ 16
</TABLE>
2
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JOHNSON CONTROLS, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
<TABLE>
<CAPTION>
June 30, September 30, June 30,
1995 1994 1994
----------- ------------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 111.6 $ 132.6 $ 93.1
Accounts receivable - net 1,317.0 1,067.0 1,027.5
Inventories 359.4 304.7 308.2
Other current assets 264.5 274.2 262.6
-------- -------- --------
Current assets 2,052.5 1,778.5 1,691.4
Property, plant and equipment - net 1,500.2 1,333.4 1,291.2
Goodwill - net 530.8 493.8 418.4
Investments in partially-owned affilates 102.2 99.7 95.4
Other noncurrent assets 116.8 101.5 112.1
-------- -------- --------
Total assets $4,302.5 $3,806.9 $3,608.5
======== ======== ========
LIABILITIES AND EQUITY
Short-term debt $ 168.4 $ 19.2 $ 14.9
Current portion of long-term debt 70.4 24.8 54.9
Accounts payable 930.4 814.9 774.8
Accrued compensation and benefits 254.8 246.3 227.6
Accrued income taxes 54.2 39.4 47.2
Billings in excess of costs and earnings
of uncompleted contracts 99.8 76.2 94.3
Other current liabilities 344.3 295.6 267.2
-------- -------- --------
Current liabilities 1,922.3 1,516.4 1,480.9
Long-term debt 639.6 670.3 573.8
Postretirement health and other benefits 170.6 167.1 162.9
Other noncurrent liabilities 270.8 250.3 236.4
Shareholders' equity 1,299.2 1,202.8 1,154.5
-------- -------- --------
Total liabilities and equity $4,302.5 $3,806.9 $3,608.5
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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JOHNSON CONTROLS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share; unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
------------------ -----------------
1995 1994 1995 1994
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $2,180.9 $1,757,8 $6,089.0 $5,024.9
Cost of sales 1,861.9 1,479.5 5,204.2 4,253.0
--------- -------- -------- --------
Gross profit 319.0 278.3 884.8 771.9
Selling, general and administrative
expenses 197.9 180.5 587.8 529.5
--------- -------- -------- --------
Operating income 121.1 97.8 297.0 242.4
Interest income 1.7 1.0 5.0 2.7
Interest expense (15.4) (9.6) (43.7) (30.7)
Miscellaneous - net (1.8) 4.4 (4.4) 4.4
--------- -------- -------- --------
Other income (expense) (15.5) (4.2) (43.1) (23.6)
--------- -------- -------- --------
Income before income taxes and minority interests 105.6 93.6 253.9 218.8
Provision for income taxes 44.4 40.3 106.6 94.1
Minority interests in net earnings of subsidiaries 5.9 7.7 18.5 15.5
--------- -------- -------- --------
Net income $55.3 $45.6 $128.8 $109.2
Earnings available for common shareholders $52.9 $43.4 $121.7 $102.3
========= ======== ======== ========
Earnings per share
Primary $1.28 $1.06 $2.96 $2.49
========= ======== ======== ========
Fully diluted $1.21 $1.00 $2.81 $2.37
========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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JOHNSON CONTROLS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions; unaudited)
<TABLE>
<CAPTION>
For the Nine Months
Ended June 30,
-----------------------
1995 1994
------ ------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $128.8 $109.2
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation 198.4 170.7
Amortization of intangibles 26.2 21.4
Equity in earnings of partially-
owned affiliates (2.6) (7.8)
Noncurrent deferred income taxes (8.3) (17.9)
Other (10.7) (10.2)
Changes in working capital, excluding
acquisition of businesses
Accounts receivable (223.2) (98.3)
Inventories (40.8) (12.2)
Other current assets 13.3 (10.3)
Accounts payable and accrued liabilities 111.6 138.6
Accrued income taxes 14.7 (11.5)
Billings in excess of costs and earnings
on uncompleted contracts 22.6 17.7
------- -------
Cash provided by operating activities 230.0 289.4
------- -------
INVESTING ACTIVITIES
Capital expenditures (339.0) (241.0)
Sale of property, plant and equipment 12.0 11.9
Acquisition of businesses (30.6) (102.9)
Change in long-term investments - net 3.3 (1.2)
Other 0.1 0.2
------- -------
Cash used by investing activities (354.2) (333.0)
------- -------
FINANCING ACTIVITIES
Increase (decrease) in short-term debt 134.3 (15.8)
Issuance of long-term debt 219.0 136.1
Repayment of long-term debt (203.0) (23.0)
Payment of cash dividends (57.5) (53.7)
Other 10.4 5.4
------- -------
Cash provided by financing activities 103.2 49.0
------- -------
(Decrease) increase in cash and cash equivalents ($21.0) $5.4
======= =======
</TABLE>
The accompanying notes are an integral part of the financial
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JOHNSON CONTROLS, INC.
FORM 10-Q, JUNE 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements
In the opinion of the company, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position,
results of operations, and cash flows for the periods presented. These
financial statements should be read in conjunction with the audited financial
statements and notes thereto contained in the company's Annual Report to
Shareholders for the year ended September 30, 1994. The results of operations
for the three and nine months ended June 30, 1995 are not necessarily
indicative of the results which may be expected for the company's 1995 fiscal
year because of seasonal and other factors.
2. 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.
Income taxes paid during the nine months ended June 30, 1995 and
1994 (net of income tax refunds) totalled approximately $103 million and $104
million, respectively. Total interest paid on both long-term and short-term
debt was $44 million and $26 million in the nine months ended June 30, 1995 and
1994, respectively.
3. 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. The cost of other inventories is determined on the
first-in, first-out (FIFO) method.
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30,
1995 1994
-------- --------
<S> <C> <C>
Raw materials and supplies $ 127.8 $ 94.9
Work-in-process 113.2 120.2
Finished goods 160.5 139.9
------- -------
FIFO inventories 401.5 355.0
LIFO reserve 42.1 46.8
------- -------
LIFO inventories $ 359.4 $ 308.2
======= =======
</TABLE>
4. Income Taxes
The provision for income taxes is determined by applying an
estimated annual effective income tax rate to income before income taxes. The
estimated annual effective income tax rate is based on the most recent
annualized forecast of pretax income, permanent book/tax differences, and tax
credits. It also includes the effect of any valuation allowance expected to be
necessary at the end of the year.
6
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JOHNSON CONTROLS, INC.
FORM 10-Q, JUNE 30, 1995
5. Earnings Per Share
Primary earnings per share are computed by dividing net income,
after deducting dividend requirements on the company's 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 $1.4 million and $1.5 million
for the three months ended June 30, 1995 and 1994, respectively and $4.3
million and $4.4 million for the nine months ended June 30, 1995 and 1994,
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 computations of
primary and fully diluted earnings per share were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- -------- -------- --------
(in millions) (in millions)
<S> <C> <C> <C> <C>
Primary 41.2 41.0 41.1 41.0
Fully diluted 44.4 44.4 44.4 44.3
</TABLE>
6. 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. ("PLY-GEM"). The
agreement provided that Hoover retain certain liabilities relating to that
business, including the 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 to date have been successful in resolving much of that litigation.
7
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JOHNSON CONTROLS, INC.
FORM 10-Q, JUNE 30, 1995
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. 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 1995
AND JUNE 30, 1994
Consolidated net sales for the third quarter of fiscal 1995 of
$2,181 million surpassed the third quarter of fiscal 1994 by $423 million or
24%. The improvement was generated by double digit sales growth in three of
the four business segments. Automotive seating sales increased over the prior
year quarter. Sales in North America were higher due to new and successful
vehicle programs, including Chrysler's Cirrus/Stratus sedans and Jeep Cherokee,
General Motor's Jimmy/Blazer and Toyota's Avalon and Camry sedans. The
consolidation of Seating Systems Technology, Inc. ("SSTI"), for which the
remaining interest was purchased January 1, 1995, also contributed to the
quarter-over-quarter increase. Automotive seating sales in Europe showed
strong improvement principally due to the new Ford Escort business and the
weaker dollar.
Controls segment sales of facility services and control systems
were higher than the prior year quarter as a result of increased sales to the
commercial buildings market. Worldwide facilities management sales were
strong, partially due to the acquisitions of Procord in September, 1994 and the
Atomic Energy Authority ("AEA") contract in late March of fiscal 1995. The
increase also stemmed from higher domestic retrofit and international new
construction activity. Sales within the government market were lower,
reflecting the loss of certain contracts and scope reductions. Worldwide
orders from the commercial market were higher than in the prior year quarter.
8
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JOHNSON CONTROLS, INC.
FORM 10-Q, JUNE 30, 1995
Plastics segment sales for the third quarter of fiscal 1995
increased over the prior year. The improvement was generated by higher unit
shipments of water and other non-soft drink containers to both the North
American and European markets. The pass-through of higher resin costs in
pricing also contributed to the sales increase. Plastics machinery sales
improved over the comparable prior year quarter.
Sales for the battery segment were slightly lower than the
comparable prior year quarter. Total unit shipments declined from the prior
year reflecting the loss of the Sears business; however, unit shipments to
existing customers increased. Higher lead costs, which are passed through in
pricing, offset a portion of the decline.
Consolidated operating income improved 24% to $121 million for
the third quarter of fiscal 1995 from $98 million in the comparable prior year
quarter. The automotive segment's operating income was higher due to the
increased volume, both in North America and Europe, and margin improvements
associated with existing vehicle programs. In addition, the acquisition of the
trim cover facilities from the Acustar division of Chrysler Corporation in
June, 1994 contributed to the operating income improvement.
Operating income from the controls business improved as a result
of increased activity in the commercial buildings market.
Plastics operating income for the quarter increased as a result
of the increases in non-soft drink container and plastics machinery volumes.
Resin costs had a negative impact on margin percentages as the recovery of
resin price increases from customers, although increasing sales, had no effect
on operating income.
The battery segment's operating income for the quarter decreased
slightly as the overall unit volume declines noted above were partially offset
by the favorable impact of cost reduction efforts.
Other expense increased to $16 million for the third quarter of
fiscal 1995 compared to the prior year's $4 million. Interest expense was
approximately $6 million higher than the comparable prior year quarter
principally resulting from the financing associated with fiscal 1994
acquisitions. Miscellaneous-net reflects approximately $5 million in increased
stock appreciation rights and deferred compensation costs associated with the
higher market price of the company's stock.
The effective income tax rate was 42% for the three month period
ended June 30, 1995. This compares with 43% for the year- ago period. The
decrease in the annual effective rate reflects an improved outlook for the
company's European operations.
9
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JOHNSON CONTROLS, INC.
FORM 10-Q, JUNE 30, 1995
The company's third quarter net income increased 21% to $55
million, up from $46 million in the prior year. Earnings available for common
shareholders of $53 million improved 22% over the prior year quarter. These
increases were due to the improvement in operating income discussed above.
Primary and fully diluted earnings per share were $1.28 and $1.21,
respectively, for the third quarter of fiscal 1995, up from $1.06 and $1.00 for
primary and fully diluted earnings per share in fiscal 1994.
COMPARISON OF OPERATING RESULTS FOR THE NINE-MONTH PERIODS ENDED JUNE 30, 1995
AND JUNE 30, 1994
For the nine months ended June 30, 1995, sales totalled $6,089
million, a 21% improvement from the comparable prior year period. A
substantial portion of the sales growth was generated by a higher level of
activity in the automotive seating market. Automotive seating sales during the
first nine months of fiscal 1995 increased over the prior year, primarily due
to the strong North American vehicle build schedule and the company's
participation with new and successful vehicle programs. European seating sales
also improved due to the success of new business, primarily with Ford,
favorable currency translation rates and improving industry vehicle production
levels.
Controls segment sales of facility services and control systems
increased during the first three quarters of fiscal 1995 due to higher sales to
the existing commercial buildings market. Strong growth within the facilities
management and retrofit markets, partially due to acquisitions, were the
primary drivers.
Plastics segment sales for the first nine months of fiscal 1995
increased, reflecting higher unit shipments of water and other non-soft drink
containers in both North America and Europe, and improved plastics machinery
sales. The pass-through of resin price increases to customers also resulted in
higher sales.
Sales for the first nine months of fiscal 1995 in the battery
segment were lower than the comparable prior year period reflecting the absence
of shipments to Sears. The decrease was partially offset by an increase in
unit shipments to existing customers and higher lead prices which are passed
along to customers.
Consolidated operating income for the first three quarters of
fiscal 1995 rose 23% to $297 million. The automotive segment's operating
income increased for the first nine months of fiscal 1995, reflecting the
increase in both North American and European volumes and improved production
efficiencies associated with existing vehicle programs.
Operating income of the controls segment was higher than the
comparable prior year period due to increased activity in the worldwide
commercial buildings market. Start-up costs associated with new contracts and
the assimilation of acquisitions had a slight impact on margin percentages.
10
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JOHNSON CONTROLS, INC.
FORM 10-Q, JUNE 30, 1995
Plastics operating income for the first nine months of fiscal
1995 increased over the prior year due to the volume improvements noted above.
However, as previously discussed, the recovery of resin price increases from
customers had a negative impact on margin percentages.
Operating income of the battery segment declined as a result of
the overall lower unit volumes. The segment's success at reducing costs
assisted in offsetting a portion of the decrease.
Management believes that sales and operating income for the
remainder of fiscal 1995 will continue to exceed prior year levels. Management
believes the automotive segment will achieve sales improvement of approximately
30%-35%. The segment will continue to benefit from new and successful vehicle
programs in both North America and Europe and favorable currency translation
rates. The controls segment is expected to achieve overall sales improvement
of 15%-20% as it continues to benefit from strong facilities management and
retrofit activity, partially due to acquisitions. Management believes that
plastics segment sales growth will approximate 15%-20% as it continues to
benefit from strong worldwide non-soft drink container demand, coupled with the
impact of the resin price pass-throughs. Management expects battery segment
sales for fiscal 1995 to be approximately 10%-15% below the prior year due to
the loss of the Sears business, partially offset by higher unit shipments to
existing customers and higher lead costs passed along to customers.
Other expense increased approximately $20 million to $43 million
for the first nine months of fiscal 1995. Interest expense increased
approximately $13 million as a result of the financing associated with fiscal
1994 acquisitions. Miscellaneous-net reflects a decrease of approximately $5
million in equity income primarily resulting from the impact of the devaluation
of the Mexican Peso on the company's unconsolidated Mexican affiliates. In
addition, the company recorded approximately $2 million in increased stock
appreciation rights and deferred compensation costs resulting from the higher
market price of the company's stock.
The effective income tax rate was 42% for the nine month period
ended June 30, 1995. This compares to approximately 43% for the year ago
period. The decrease in the estimated annual effective rate reflects an
improved outlook for the company's European operations.
Minority interests in net earnings of subsidiaries increased to
$19 million from $16 million for the year ago period. The increase relates to
higher earnings from certain of the company's North American automotive seating
subsidiaries.
11
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JOHNSON CONTROLS, INC.
FORM 10-Q, JUNE 30, 1995
Net income for the first nine months of fiscal 1995 increased 18%
to $129 million from $109 million in the prior year. Earnings available to
common shareholders of $122 million exceeded the prior year period by $19
million or 19%. Primary and fully diluted earnings per share were $2.96 and
$2.81, respectively, for the first nine months of fiscal 1995, up from $2.49
and $2.37 in fiscal 1994.
COMPARISON OF FINANCIAL CONDITION
Cash Flow and Working Capital
Cash provided by operating activities during the nine months
ended June 30, 1995 of $230 million was $59 million lower than the comparable
prior year period, primarily as a result of higher accounts receivable, which
were generated by the higher volumes.
The company's working capital totalled $130 million at June 30,
1995, compared with $262 million and $211 million at September 30, 1994 and
June 30, 1994, respectively. The decline in working capital from the
comparable prior year dates is primarily attributable to increases in
short-term debt and accounts payable, partially offset by increases in accounts
receivable and inventories. Short-term debt increased to fund operating
activities, capital spending and current year acquisitions.
Capital Expenditures and Other Investments
Capital expenditures for property, plant and equipment were
approximately $339 million during the first nine months of fiscal 1995, up from
$241 million for the comparable prior year period. Management projects that
capital spending for the full year will approximate $425 million. The majority
of the spending has been related to the expansion of automotive facilities and
product lines and to increase plastic container capacity. Cost reduction
efforts in all segments will continue to contribute to the spending.
Goodwill increased to $531 million from $494 million at September
30, 1994 and $418 million at June 30, 1994. The increase from September 30
primarily relates to goodwill associated with several small acquisitions
including AEA and SSTI previously discussed. In addition, during the quarter,
the company purchased B&W Kunststoffmaschinen Handelsgesellschaft GmbH ("B&W"),
a plastics machinery manufacturer located in Germany and the Czech Republic.
The increase from the prior year relates to the acquisitions of Procord and
Haydon in the fourth quarter of fiscal 1994 and the current year acquisitions.
12
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JOHNSON CONTROLS, INC.
FORM 10-Q, JUNE 30, 1995
Capitalization
The company's total capitalization at June 30, 1995, September
30, 1994 and June 30, 1994 was $2,178 million, $1,917 million and $1,798
million, respectively. The company's capitalization at June 30, 1995 included
short-term debt of $239 million, long-term debt of $640 million and
shareholders' equity of $1,299 million. Short-term debt increased
significantly from both a year ago and September 30, as previously discussed.
Total debt as a percentage of total capitalization was 40% at the end of the
current quarter, 37% at September 30, 1994 and 36% a year ago.
The company believes its capital resources and liquidity position
at June 30, 1995 are adequate to meet projected needs. Requirements for
working capital, capital expenditures, dividends and debt maturities in fiscal
1995 will continue to be funded from operations, supplemented by short-term
borrowings, if required, to meet peak seasonal needs.
Backlog
The unearned backlog of commercial building systems, services and
facilities management contracts to be executed within the next year at June 30,
1995 was $1,130 million, compared with $750 million at September 30, 1994 and
$794 million at June 30, 1994. The increase primarily relates to the impact of
fiscal 1994 acquisitions and strong worldwide facilities management and
retrofit activity. The unearned backlog of government facilities management
contracts, which reflects only the noncancellable portion of uncompleted
contracts was $285 million compared with $590 million at September 30, 1994 and
$429 million last year. The decrease primarily reflects the absence of certain
government contracts, scope reductions and the timing of renewals.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no significant changes in status since the last
Report, except with respect to the following matters:
ENVIRONMENTAL LITIGATION AND PROCEEDINGS. With respect to the Environmental
Litigation and Proceedings reported in the company's Annual Report on Form 10-K
for the fiscal year ending September 30, 1994, and subsequent quarterly
updates, there have been the following changes in status:
13
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JOHNSON CONTROLS, INC.
FORM 10-Q, JUNE 30, 1995
Schuylkill Metals of Plant City, Inc. and Arrow Electronics, Inc.
v. Johnson Controls, Inc., Case # 95-610-CIV-T-23B, (M.D. FL 1995). On April
20, 1995, Schuylkill Metals of Plant City, Inc. ("SMPCI") and its parent
corporation, Arrow Electronics, Inc. filed a complaint in the United States
District Court for the Middle District of Florida, Tampa Division naming
Johnson Controls, Inc. as defendant in a Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") cost recovery and contribution
action. This complaint alleges that Johnson Controls arranged for disposal or
treatment of lead acid batteries at the SMPCI battery breaking site in Plant
City, Florida. According to the complaint, SMPCI and Arrow Electronics have
alleged that they spent $12 million to date on environmental response costs and
that Johnson Controls should be liable for an equitable share of past and
future environmental response costs. The company will vigorously defend itself
in this matter.
Johnson Controls, Inc. v. Employers Insurance of Wausau, a Mutual
Company, et.al. (Wis. Ct. App. Case No. 95-1796). 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 (Johnson
Controls, Inc. v. Employers Insurance of Wausau, a Mutual Company, et.al.
(Milwaukee County Cir. Ct. Case No. 89-CV- 016174)). 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.
Item 4. Results of Votes of Security Holders
Reference is made to Item 4 of the company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1994, for a description of the
results of votes of security holders at the Annual Meeting of Shareholders held
January 25, 1995.
Item 5. Other Information
The company announced it is in advanced negotiations for the
acquisition of a majority interest in the Roth Freres companies. Roth Freres
is a major supplier of seating and interior components to the European
automotive industry. Headquartered in Stasbourg, France, it is a
privately-held company which had sales in 1994 of approximately $600 million.
The company and Roth Freres have been joint-venture partners
since 1988 in supplying complete seats and headliners to automotive customers
in Europe and the United States. The company accounts for these entities on an
equity basis and, as a result, has not consolidated any of the related sales.
A final decision on the proposal is anticipated by the end of
September, 1995.
14
<PAGE> 15
JOHNSON CONTROLS, INC.
FORM 10-Q, JUNE 30, 1995
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement regarding computation of primary and fully
diluted earnings per share.
12 Statement regarding the computation of the ratio of
earnings to fixed charges.
27 Financial Data Schedule (electronic filing only)
(b) There were no reports on Form 8-K filed during the
three months ended June 30, 1995.
15
<PAGE> 16
JOHNSON CONTROLS, INC.
FORM 10-Q, JUNE 30, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
JOHNSON CONTROLS, INC.
Date: August 11, 1995 BY Stephen A. Roell
-----------------------
Vice President and
Chief Financial Officer
16
<PAGE> 1
EXHIBIT 11
JOHNSON CONTROLS, INC.
COMPUTATION OF PRIMARY AND FULLY DILUTED
EARNINGS PER SHARE
(In millions, except per share data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net Income $55.3 $45.6 $128.8 $109.2
Preferred dividends, net of tax
benefit (2.4) (2.2) (7.1) (6.9)
-------- -------- -------- --------
Earnings available for common
shareholders $52.9 $43.4 $121.7 $102.3
-------- -------- -------- --------
Average common shares outstanding
Common stock 40.9 40.7 40.9 40.6
Common stock equivalents -
Assumed exercise of stock options 0.3 0.3 0.2 0.4
-------- -------- -------- --------
41.2 41.0 41.1 41.0
-------- -------- -------- --------
Primary earnings per share $1.28 $1.06 $2.96 $2.49
======== ======== ======== ========
FULLY DILUTED EARNINGS PER SHARE
Net Income $55.3 $45.6 $128.8 $109.2
After tax compensation expense
which would arise from the assumed
conversion of the Series D
Convertible Preferred Stock (1.4) (1.5) (4.3) (4.4)
-------- -------- -------- --------
Fully diluted earnings $53.9 $44.1 $124.5 $104.8
-------- -------- -------- --------
Average common shares outstanding
Common stock 40.9 40.7 40.9 40.6
Conversion of Series D Convertible
Preferred Stock 3.1 3.2 3.1 3.3
Common stock equivalents -
Assumed exercise of stock options 0.4 0.5 0.4 0.4
-------- -------- -------- --------
44.4 44.4 44.4 44.3
-------- -------- -------- --------
Fully diluted earnings per share $1.21 $1.00 $2.81 $2.37
======== ======== ======== ========
</TABLE>
17
<PAGE> 1
EXHIBIT 12
JOHNSON CONTROLS, INC.
COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(Dollars in millions)
<TABLE>
<CAPTION>
For the Nine Months
Ended June 30, 1995
-----------------------
<S> <C>
Net income $128.8
Provision for income taxes 106.6
Undistributed earnings of partially-owned affilates (3.9)
Minority interests in net earnings of subsidiaries 18.5
Amortization of previously capitalized interest 2.5
---------
252.5
---------
Fixed charges:
Interest incurred and amortization of debt expenses 54.9
Estimated portion of rent expense 20.1
---------
Fixed charges 75.0
Less: Interest capitalized during period (6.7)
---------
68.3
---------
Earnings $320.8
=========
Ratio of earnings to fixed charges 4.3
=========
</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 which are less than 50% owned, minority interests in net
earnings of 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.
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 111,600
<SECURITIES> 0
<RECEIVABLES> 1,337,600
<ALLOWANCES> 20,600
<INVENTORY> 359,400
<CURRENT-ASSETS> 2,052,500
<PP&E> 3,004,300
<DEPRECIATION> 1,504,100
<TOTAL-ASSETS> 4,302,500
<CURRENT-LIABILITIES> 1,992,300
<BONDS> 639,600
<COMMON> 7,100
160,800
0
<OTHER-SE> 1,131,300
<TOTAL-LIABILITY-AND-EQUITY> 4,302,500
<SALES> 6,089,000
<TOTAL-REVENUES> 6,089,000
<CGS> 5,204,200
<TOTAL-COSTS> 5,204,200
<OTHER-EXPENSES> 586,000
<LOSS-PROVISION> 1,200
<INTEREST-EXPENSE> 43,700
<INCOME-PRETAX> 253,900
<INCOME-TAX> 106,600
<INCOME-CONTINUING> 128,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,800
<EPS-PRIMARY> 2.96
<EPS-DILUTED> 2.81
</TABLE>
