<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 March 31, 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 March 31, 1995
----- -----------------------------
Common Stock $.16 2/3 Par Value 40,825,722
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JOHNSON CONTROLS, INC.
FORM 10-Q
March 31, 1995
REPORT INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. - FINANCIAL INFORMATION:
Consolidated Statement of Financial Position
at March 31, 1995, September 30, 1994 and
March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Income for the Three and
Six-Month Periods Ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows for the Six-
Month Periods Ended March 31, 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 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>
March 31, September 30, March 31,
1995 1994 1994
-------- ----------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $129.2 $132.6 $63.3
Accounts receivable - net 1,242.7 1,067.0 984.0
Inventories 368.5 304.7 289.0
Other current assets 263.8 274.2 244.9
-------- -------- --------
Current assets 2,004.2 1,778.5 1,581.2
Property, plant and equipment - net 1,449.7 1,333.4 1,228.0
Goodwill - net 513.0 493.8 318.2
Investments in partially-owned affiliates 95.2 99.7 92.3
Other noncurrent assets 115.1 101.5 68.6
-------- -------- --------
Total assets $4,177.2 $3,806.9 $3,288.3
======== ======== ========
LIABILITIES AND EQUITY
Short-term debt $206.4 $19.2 $43.8
Current portion of long-term debt 71.7 24.8 54.9
Accounts payable 917.0 814.9 686.4
Accrued compensation and benefits 235.3 246.3 201.0
Accrued income taxes 42.7 39.4 25.3
Billings in excess of costs and earnings
on uncompleted contracts 90.4 76.2 90.5
Other current liabilities 303.0 295.6 254.8
-------- -------- --------
Current liabilities 1,866.5 1,516.4 1,356.7
Long-term debt 631.9 670.3 453.1
Postretirement health and other benefits 171.5 167.1 160.8
Other noncurrent liabilities 261.9 250.3 204.5
Shareholders' equity 1,245.4 1,202.8 1,113.2
-------- -------- --------
Total liabilities and equity $4,177.2 $3,806.9 $3,288.3
======== ======== ========
</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 Six Months
Ended March 31, Ended March 31,
---------------------- -----------------------
1995 1994 1995 1994
---- ----- ---- ----
<S> <C> <C> <C> <C>
Net sales $2,050.5 $1,682.1 $3,908.1 $3,267.1
Cost of sales 1,762.0 1,441.1 3,342.3 2,773.5
-------- -------- -------- --------
Gross profit 288.5 241.0 565.8 493.6
Selling, general and administrative
expenses 205.2 178.0 389.9 349.0
-------- -------- -------- --------
Operating income 83.3 63.0 175.9 144.6
Interest income 1.8 0.8 3.3 1.7
Interest expense (15.7) (10.5) (28.3) (21.1)
Miscellaneous - net (2.2) (1.4) (2.6) 0.0
-------- -------- -------- --------
Other income (expense) (16.1) (11.1) (27.6) (19.4)
-------- -------- -------- --------
Income before income taxes and minority interests 67.2 51.9 148.3 125.2
Provision for income taxes 27.4 22.3 62.2 53.8
Minority interests in net earnings of subsidiaries 7.5 4.1 12.6 7.8
-------- -------- -------- --------
Net income $32.3 $25.5 $73.5 $63.6
======== ======== ======== ========
Earnings available for common shareholders $30.0 $23.2 $68.8 $59.0
======== ======== ======== =======
Earnings per share
Primary $0.73 $0.56 $1.68 $1.43
======== ======== ======== ========
Fully diluted $0.70 $0.54 $1.60 $1.37
======== ======== ======== ========
</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 Six Months
Ended March 31,
-----------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $73.5 $63.6
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation 125.5 114.8
Amortization of intangibles 17.4 14.3
Equity in losses (earnings) of partially-
owned affiliates 1.5 (4.9)
Noncurrent deferred income taxes (8.0) (10.9)
Other (3.3) 7.8
Changes in working capital, excluding
acquisition of businesses
Accounts receivable (163.5) (65.2)
Inventories (58.0) (8.7)
Other current assets 12.5 5.5
Accounts payable and accrued liabilities 65.4 42.7
Accrued income taxes 3.5 (33.3)
Billings in excess of costs and earnings
on uncompleted contracts 13.4 14.2
------ ------
Cash provided by operating activities 79.9 139.9
------ ------
INVESTING ACTIVITIES
Capital expenditures (230.3) (144.9)
Sale of property, plant and equipment 10.7 8.0
Change in long-term investments - net 4.8 (0.6)
Reversion of pension assets 0.1 0.2
Acquisition of businesses (23.6) (5.1)
------ ------
Cash used by investing activities (238.3) (142.4)
------ ------
FINANCING ACTIVITIES
Increase in short-term debt 178.4 14.4
Issuance of long-term debt 212.6 11.1
Repayment of long-term debt (201.0) (16.3)
Payment of cash dividends (38.3) (35.8)
Other 3.3 4.7
------ ------
Cash provided (used) by financing activities 155.0 (21.9)
------ ------
Decrease in cash and cash equivalents ($3.4) ($24.4)
====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 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
six months ended March 31, 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 six months ended March 31, 1995 and 1994
(net of income tax refunds) totalled approximately $77 million and $86 million,
respectively. Total interest paid on both long-term and short-term debt was
$26 million and $19 million in the six months ended March 31, 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>
March 31,
1995 1994
-------- --------
<S> <C> <C>
Raw materials and supplies $ 124.5 $ 87.4
Work-in-process 118.9 112.2
Finished goods 167.2 136.2
------- -------
FIFO inventories 410.6 335.8
LIFO reserve 42.1 46.8
------- -------
LIFO inventories 368.5 289.0
======= =======
</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, MARCH 31, 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 March 31, 1995 and 1994, respectively and $2.9
million and $3.0 million for the six months ended March 31, 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 Six Months Ended
March 31, March 31,
1995 1994 1995 1994
-------- ------- ------- -------
(in millions) (in millions)
<S> <C> <C> <C> <C>
Primary 41.0 41.1 41.0 41.1
Fully diluted 44.2 44.4 44.2 44.4
</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 have been successful in resolving much of that litigation.
7
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 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 MARCH 31,
1995 AND MARCH 31, 1994
Consolidated net sales rose 22% over the comparable prior year quarter
to $2,051 million. Double digit sales growth was achieved in three of our four
business segments. Automotive seating sales in North America were higher than
the prior year quarter due to the continued strength of the industry vehicle
build schedule and the company's participation with new and successful vehicle
programs, including Chrysler's Jeep Cherokee and Stratus/Cirrus sedans and
General Motor's S10 Pick-up and Blazer/Jimmy. The consolidation of Seating
Systems Technology, Inc. (SSTI), a domestic seating business which produces
rear seats for the Ford Explorer for which the remaining interest was purchased
January 1, 1995, also contributed to the quarter-over-quarter increase.
Automotive seating sales in Europe were higher than the prior year quarter
principally due to new business, the weaker dollar and improving industry
production levels.
8
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1995
The controls segment's sales of facility services and control systems
increased over the prior year quarter due to increased activity in the existing
commercial buildings market. Strong facilities management and retrofit
activity were the primary drivers. Facilities management sales benefitted from
the September, 1994 acquisition of Procord, a United Kingdom ("U.K.")
facilities management business. International sales growth, principally in
Europe and the Pacific Rim, was impacted by the July, 1994 acquisition of
Haydon, a U.K. controls service business, and the weaker U.S. dollar. Sales to
the government market declined due to the loss of certain contracts. Worldwide
orders from the commercial market were higher than in the prior year quarter
primarily on the strength of North American bookings in the retrofit market. In
late March, the company acquired the Atomic Energy Agency (AEA) facilities
management contract in the U.K.
Increased plastics segment sales for the second quarter of fiscal 1995
resulted from higher unit shipments of water and hot-fill containers for juices
and isotonic sports drinks in both North America and Europe. Sales to the
Latin American and Eastern European markets also improved. Resin price
increases in both North America and Europe have been successfully passed along
to customers. Plastics machinery sales were higher than the year ago period.
Battery sales for the second quarter decreased due to the absence of
shipments to Sears and the moderate winter weather. Higher lead prices, which
are passed along to customers, offset a portion of the decline.
Consolidated operating income for the second quarter of fiscal 1995 of
$83 million represents a 32% improvement over the prior year. The increase in
automotive seating sales accounted for the majority of the overall improvement.
Operating income in the automotive segment grew at a higher rate than sales as
a result of improved margins associated with existing vehicle programs, and
improved European profitability.
Operating income from the controls business rose on par with sales as a
result of the increased activity in the commercial buildings market.
Plastics operating income increased at a rate less than sales. The
impact of increased higher margin, non-soft drink container volume was
partially offset by costs associated with adding capacity for soft drink and
non-soft drink containers. In addition, the recovery of resin price increases
from customers, although increasing sales, had no effect on operating income.
The battery segment experienced a slight operating loss in the quarter,
compared with a slight gain in the prior year, resulting from the overall unit
volume declines noted above, partially offset by the favorable impact of
continued cost reduction efforts.
9
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1995
Other expense increased to $16 million for the second quarter of fiscal
1995 compared to $11 million for the prior year. The increase primarily
relates to higher interest expense and the recording of equity losses. A $5
million increase in interest expense resulted primarily from the financing
associated with fiscal 1994 acquisitions. Equity losses included approximately
$4 million in Mexican peso devaluation losses associated with the company's
Mexican unconsolidated affiliates. Partially offsetting the above was a
reduction in stock appreciation rights expense resulting from changes in the
company's common stock price.
The effective income tax rate was 41% for the three month period ended
March 31, 1995. This compares with 43% for the year-ago period. The
quarterly rate reflects the adjustment required to provide a year-to-date
effective rate of 42%. The 1% 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 $8
million from $4 million for the year ago period. The increase relates to
higher earnings from certain of the company's North American automotive seating
subsidiaries.
The company's second quarter net income reached $32 million, an increase
of 27% from the prior year quarter. Earnings available for common shareholders
of $30 million was $7 million or 29% over the prior year quarter. These
increases were primarily due to the significant improvement in operating
income. Primary and fully diluted earnings per share were $.73 and $.70,
respectively, for the second quarter of fiscal 1995, up from $.56 and $.54 for
primary and fully diluted earnings per share in fiscal 1994.
COMPARISON OF OPERATING RESULTS FOR THE SIX-MONTH PERIODS ENDED MARCH 31, 1995
AND MARCH 31, 1994
For the six months ended March 31, 1995, sales totalled $3,908 million,
an increase of 20% from a year ago. A substantial portion of the increase
resulted from a higher level of activity in the automotive seating market.
Automotive seating sales in the first half 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 increased from the year ago period due to improving
industry vehicle production levels, the success of new vehicle programs in
Europe and favorable exchange rates.
Controls segment sales of facility services and control systems
increased during the first half of fiscal 1995 due to higher sales to the
worldwide existing commercial buildings market. Most of the revenue growth was
associated with facility management service contracts, partially due to fiscal
1994 acquisitions, and increased retrofit activity.
Plastics segment sales for the first half of fiscal 1995 increased,
reflecting higher worldwide unit shipments of non-soft drink containers,
including water and hot-fill containers, and an improvement in plastics
machinery sales. The pass-through of resin price increases also resulted in
higher sales.
10
<PAGE> 11
JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1995
Sales for the first six months of fiscal 1995 in the battery segment
were lower than the comparable prior year period resulting from the absence of
shipments to Sears and the mild winter weather. The decrease was slightly
offset by higher lead prices which are passed along to customers.
Consolidated operating income rose 22% during the first half of fiscal
1995 to $176 million. Three of the four business segments contributed to the
increase. The automotive segment's operating income increased from the
comparable prior year period, reflecting strong North American volumes and
improved European profitability.
Operating income of the controls segment grew as a result of the
increased activity in the worldwide existing commercial buildings market.
Start-up costs associated with new contracts and the assimilation of
acquisitions had a slight impact on facilities management margins.
Plastics income for the first half of fiscal 1995 increased over the
prior year due to the volume improvements noted above, including sales of
higher margin non-soft drink containers.
Operating income of the battery segment declined due to the lower unit
volumes previously discussed. The segment's success at reducing costs assisted
in offsetting a portion of this 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 25%-30%. The segment will
continue to benefit from the strong North American build schedule, the impact
of new program launches in Europe, and a recovering European economy. The
controls segment should continue to benefit from strong facilities management
and retrofit activity, partially due to prior year acquisitions, and therefore,
management expects 15%-20% overall sales improvement. Management believes that
plastics segment sales growth will approximate 20%-25% as it continues to
benefit from strong non-soft drink container demand, coupled with the impact of
the resin price pass-throughs. Management continues to expect battery segment
sales for fiscal 1995 to be approximately 10%-15% below the prior year due to
the loss of the Sears business and mild winter weather, partially offset by
higher unit shipments to new and existing replacement and original equipment
customers.
Other expense increased approximately $8 million to $28 million for the
first six months of fiscal 1995, resulting from higher interest expense and the
recording of equity losses. Interest expense increased principally as a result
of the financing associated with fiscal 1994 acquisitions. Equity losses
primarily resulted from the impact of the devaluation of the Mexican Peso on
the company's unconsolidated Mexican affiliates of approximately $6 million.
The effective income tax rate was 42% for the six month period ended
March 31, 1995. This compares to 43% for the year ago period. This decrease
reflects an improved outlook for the company's European operations.
11
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1995
Minority interests in net earnings of subsidiaries increased to $13
million from $8 million for the year ago period. The increase primarily
relates to improvements in earnings from certain of the company's North
American automotive seating subsidiaries.
Net income for the first six months of fiscal 1995 increased 16% to $74
million from $64 million for the first half of fiscal 1994. Earnings available
to common shareholders of $69 million exceeded the prior year period by $10
million or 17%. Primary and fully diluted earnings per share were $1.68 and
$1.60, respectively, for the first half of fiscal 1995, up from $1.43 and $1.37
in fiscal 1994.
COMPARISON OF FINANCIAL CONDITION
Cash Flow and Working Capital
Cash provided by operating activities during the six months ended March
31, 1995 of $80 million was $60 million lower than the comparable prior year
period, primarily due to higher accounts receivable which were generated by the
higher sales volumes.
The company's working capital totalled $138 million at March 31, 1995,
compared with $262 million and $225 million at September 30, 1994 and March 31,
1994, respectively. The decline in working capital over the comparable prior
year amounts is primarily a result of increases in short-term debt and accounts
payable, partially offset by the increase in accounts receivable noted above,
and higher inventories. Short-term debt increased to fund operating
activities, capital spending and the current year acquisitions previously
discussed. Fluctuations in working capital items generally reflect the higher
volumes. Fluctuations in accrued income taxes occur as a result of differences
between the timing of quarterly provisions for income tax expense and the
payment of estimated tax liabilities.
Capital Expenditures and Other Investments
Capital expenditures for property, plant and equipment were
approximately $230 million during the first six months of fiscal 1995, up from
$145 million for fiscal 1994. Management projects capital spending for the
full year to approximate $425 million. The majority of the spending has, and
will continue to be, related to the expansion of automotive facilities and
product lines in Europe and to increase non-soft drink plastic container
capacity.
Investments in partially-owned affiliates decreased approximately $5
million from the September 30, 1994 balance primarily due to the company's
recording of equity losses, as previously described.
12
<PAGE> 13
JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1995
Capitalization
The company's total capitalization at March 31, 1995, September 30, 1994
and March 31, 1994 was $2,155 million, $1,917 million and $1,665 million,
respectively. The company's capitalization at March 31, 1995 included
short-term debt of $278 million, long-term debt of $632 million and
shareholders' equity of $1,245 million. Short-term debt increased
significantly from both a year ago and September 30, as previously discussed.
Long-term debt reflects the issuances of $125 million of 20 year, 7.7%
debentures and $30 million of 6.92% private notes in the second quarter of
fiscal 1995. The proceeds of these offerings were used to refinance $150
million of the company's 8.875% notes which were due in 1998. Total debt as a
percentage of total capitalization was 42% at the end of the current quarter,
37% at September 30, 1994 and 33% a year ago. Management expects this ratio to
approximate 39% by the company's fiscal year-end.
The company believes its capital resources and liquidity position at
March 31, 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 March
31, 1995 was $1,094 million, compared with $750 million at September 30, 1994
and $684 million at March 31, 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 $348 million compared with $590 million at September
30, 1994 and $552 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, there have been the following
changes in status:
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1995
Taracorp: In February, 1995, the EPA issued a proposed plan outlining
its proposal for addressing an on-site waste pile, off-site waste fill areas,
and groundwater. This proposed plan calls for work in addition to the soil
remediation work called for in the 1990 record of decision ("ROD"). The EPA
estimates the cost of its preferred remedy under this proposed plan to be
approximately $9 million. The PRP group believes these areas can be
appropriately addressed for significantly less than $9 million and, on April
18, 1995, the PRP group submitted comments to the EPA setting forth its
position. The company does not have information as to when the EPA will issue
a ROD for this portion of the site remedy.
Rasmussen: In February, 1995, the company made an additional payment of
approximately $1.1 million for site remediation costs under the settlement
agreement and consent decree. The company's total contribution to date is
approximately $1.6 million of the original estimated total of $3.5 million.
Wildcat: In January, 1995, the company and all other parties
tentatively agreed to settle this matter. The parties will likely sign a
consent decree in the summer of 1995. The company's ultimate liability under
the tentative settlement agreement will be a small fraction of the alleged $1.8
million in total damages.
Johnson Controls, Inc. v. Employers Insurance of Wausau, a Mutual
Company, et. al. (Case No. 89-CV-016174): On February 24, 1995, Milwaukee
County Circuit Court granted the summary judgment motion of the defendant
Employers Insurance of Wausau (this motion was joined by defendant Travelers
Insurance) and dismissed Johnson Controls' complaint seeking to recover
environmental investigation and cleanup costs at 21 sites. The Court followed
the reasoning of a recent Wisconsin Supreme Court decision and 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 insurance
policies. The Court has not yet issued an order in this case, but it will
likely do so in the next few months. The company is considering appealing this
decision. 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.
14
<PAGE> 15
JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 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) On March 16, 1995 the company filed a report on Form 8-K, filing
as exhibits various documents relating to the establishment of a
$350 million shelf registration statement and the issuance by the
company of $125 million of 7.7% debentures.
15
<PAGE> 16
JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 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: May 12, 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 Six Months
Ended March 31, Ended March 31,
-------------------- ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net Income $32.3 $25.5 $73.5 $63.6
Preferred dividends, net of tax
benefit (2.3) (2.3) (4.7) (4.6)
----- ----- ----- -----
Earnings available for common
shareholders $30.0 $23.2 $68.8 $59.0
----- ----- ----- -----
Average common shares outstanding
Common stock 40.8 40.6 40.8 40.6
Common stock equivalents -
Assumed exercise of stock options 0.2 0.5 0.2 0.5
----- ----- ----- -----
41.0 41.1 41.0 41.1
----- ----- ----- -----
Primary earnings per share $0.73 $0.56 $1.68 $1.43
===== ===== ===== =====
FULLY DILUTED EARNINGS PER SHARE
Net Income $32.3 $25.5 $73.5 $63.6
After tax compensation expense
which would arise from the assumed
conversion of the Series D
Convertible Preferred Stock (1.4) (1.5) (2.9) (3.0)
----- ----- ----- -----
Net income as adjusted $30.9 $24.0 $70.6 $60.6
----- ----- ----- -----
Average common shares outstanding
Common stock 40.8 40.6 40.8 40.6
Conversion of Series D Convertible
Preferred Stock 3.2 3.2 3.2 3.2
Common stock equivalents -
Assumed exercise of stock options 0.2 0.6 0.2 0.6
----- ----- ----- -----
44.2 44.4 44.2 44.4
----- ----- ----- -----
Fully diluted earnings per share $0.70 $0.54 $1.60 $1.37
===== ===== ===== =====
</TABLE>
17
<PAGE> 1
EXHIBIT 12
JOHNSON CONTROLS, INC.
COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(Dollars in millions)
<TABLE>
<CAPTION>
For the Six Months
Ended March 31, 1995
--------------------
<S> <C>
Net income $ 73.5
Provision for income taxes 62.2
Undistributed earnings of partially-owned affiliates (3.3)
Minority interests in net earnings of subsidiaries 12.6
Amortization of previously capitalized interest 1.6
------
146.6
------
Fixed charges:
Interest incurred and amortization of debt expense 35.9
Estimated portion of rent expense 13.4
------
Fixed charges 49.3
Less: Interest capitalized during period (4.5)
------
44.8
------
Earnings $191.4
======
Ratio of earnings to fixed charges 3.9
======
</TABLE>
For the purpose of computing this ratio, "earnings" consist of (a) income from
continuing operations before income taxes (adjusted for undistributed earning
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
<CIK> 0000053669
<NAME> JOHNSON CONTROLS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 129,200
<SECURITIES> 0
<RECEIVABLES> 1,266,300
<ALLOWANCES> 23,600
<INVENTORY> 368,500
<CURRENT-ASSETS> 2,004,200
<PP&E> 2,890,800
<DEPRECIATION> 1,441,100
<TOTAL-ASSETS> 4,177,200
<CURRENT-LIABILITIES> 1,866,500
<BONDS> 631,900
<COMMON> 7,100
162,100
0
<OTHER-SE> 1,076,200
<TOTAL-LIABILITY-AND-EQUITY> 4,177,200
<SALES> 3,908,100
<TOTAL-REVENUES> 3,908,100
<CGS> 3,342,300
<TOTAL-COSTS> 3,342,300
<OTHER-EXPENSES> 388,100
<LOSS-PROVISION> 1,100
<INTEREST-EXPENSE> 28,300
<INCOME-PRETAX> 148,300
<INCOME-TAX> 62,200
<INCOME-CONTINUING> 73,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,500
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 1.60
</TABLE>
