<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, 1996
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, 1996
----- ----------------------------
Common Stock $.16 2/3 Par Value 41,428,528
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JOHNSON CONTROLS, INC.
FORM 10-Q
June 30, 1996
REPORT INDEX
<TABLE>
<CAPTION>
Page No.
--------
PART I. - FINANCIAL INFORMATION:
<S> <C>
Consolidated Statement of Financial Position
at June 30, 1996, September 30, 1995 and
June 30, 1995 .......................................................... 3
Consolidated Statement of Income for the Three and
Nine-Month Periods Ended June 30, 1996 and 1995 ........................ 4
Consolidated Statement of Cash Flows for the Nine-
Month Periods Ended June 30, 1996 and 1995 ............................. 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 .................................. 14
SIGNATURES ................................................................. 15
</TABLE>
2
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JOHNSON CONTROLS, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
<TABLE>
<CAPTION>
June 30, September 30, June 30,
1996 1995 1995
--------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $164.3 $103.8 $111.6
Accounts receivable - net 1,692.2 1,287.5 1,317.0
Inventories 429.8 355.5 359.4
Other current assets 358.3 317.1 264.5
--------------- ------------- -------------
Current assets 2,644.6 2,063.9 2,052.5
Property, plant and equipment - net 1,600.9 1,518.8 1,500.2
Goodwill - net 586.7 519.1 530.8
Investments in partially-owned affiliates 143.2 90.8 102.2
Other noncurrent assets 123.5 128.3 116.8
--------------- ------------- -------------
Total assets $5,098.9 $4,320.9 $4,302.5
=============== ============= =============
LIABILITIES AND EQUITY
Short-term debt $247.2 $130.2 $168.4
Current portion of long-term debt 21.4 67.7 70.4
Accounts payable 1,264.0 983.5 930.4
Accrued compensation and benefits 276.1 258.5 254.8
Accrued income taxes 76.0 35.5 54.2
Billings in excess of costs and earnings
on uncompleted contracts 100.7 87.8 99.8
Other current liabilities 372.8 346.3 344.3
--------------- ------------- -------------
Current liabilities 2,358.2 1,909.5 1,922.3
Long-term debt 767.3 630.0 639.6
Postretirement health and other benefits 167.1 168.8 170.6
Other noncurrent liabilities 368.0 272.4 270.8
Shareholders' equity 1,438.3 1,340.2 1,299.2
--------------- ------------- -------------
Total liabilities and equity $5,098.9 $4,320.9 $4,302.5
=============== ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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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,
--------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net sales $2,705.6 $2,180.9 $7,332.3 $6,089.0
Cost of sales 2,332.5 1,861.9 6,335.6 5,204.2
-------- -------- -------- ---------
Gross profit 373.1 319.0 996.7 884.8
Selling, general and administrative
expenses 234.8 197.9 661.6 587.8
-------- -------- -------- ---------
Operating income 138.3 121.1 335.1 297.0
Interest income 2.1 1.7 5.6 5.0
Interest expense (19.9) (15.4) (56.6) (43.7)
Miscellaneous - net 7.0 (1.8) 8.5 (4.4)
-------- -------- -------- ---------
Other income (expense) (10.8) (15.5) (42.5) (43.1)
-------- -------- -------- ---------
Income before income taxes and minority interests 127.5 105.6 292.6 253.9
Provision for income taxes 52.2 44.4 119.9 106.6
Minority interests in net earnings of subsidiaries 6.0 5.9 20.0 18.5
-------- -------- -------- ---------
Net income $69.3 $55.3 $152.7 $128.8
======== ======== ======== =========
Earnings available for common shareholders $66.9 $52.9 $145.6 $121.7
======== ======== ======== =========
Earnings per share
Primary $1.60 $1.28 $3.49 $2.96
======== ======== ======== =========
Fully diluted $1.51 $1.21 $3.31 $2.81
======== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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JOHNSON CONTROLS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions, unaudited)
<TABLE>
<CAPTION>
For the Nine Months
Ended June 30,
-------------------------------
1996 1995
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $152.7 $128.8
Adjustments to records net income to cash
provided by operating activities
Depreciation 226.4 198.4
Amoritization of intangibles 26.9 26.2
Equity in earnings of partially-
owned affiliates (9.4) (2.6)
Noncurrent deferred income taxes (10.8) (8.3)
Other 17.3 (10.7)
Changes in working capital, excluding
acquisition of businesses
Accounts receivable (231.5) (223.2)
inventories (57.0) (40.8)
Other current assets (31.1) 13.3
Accounts payable and accrued liabilities 200.2 111.6
Accrued income taxes 39.1 14.7
Billings in excess of costs and earnings
on uncompleted contracts 13.8 22.6
------------ -------------
Cash provided by operating activities 336.6 230.0
------------ -------------
INVESTING ACTIVITIES
Capital expenditures (260.9) (339.0)
Sale of properly, plant and equipment 15.9 12.0
Acquisition of business (119.2) (30.6)
Change in long-term investments-net (21.6) 3.3
Other 0.7 0.1
------------ -------------
Cash provided by financing activities (385.1) (354.2)
------------ -------------
FINANCING ACTIVITIES
Increase in short-term debt 99.2 134.3
Issuance of long-term debt 152.2 219.0
Repayment of long-term debt (79.5) (203.0)
Payment of cash dividends (60.1) (57.5)
other (2.8) 10.4
------------ -------------
Cash provided by financing activities 109.0 103.2
------------ -------------
Increase (decrease) in cash and cash equivalents $60.5 ($21.0)
============ =============
</TABLE>
The accompanying notes are an integral part of the finanial statments.
5
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JOHNSON CONTROLS, INC.
FORM 10-Q, June 30, 1996
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, 1995. The results of operations for the three and
nine months ended June 30, 1996 are not necessarily indicative of the results
which may be expected for the company's 1996 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, 1996 and 1995
(net of income tax refunds) totalled approximately $44 million and $88 million,
respectively. The decrease relates to the application of fiscal 1995
overpayments to fiscal 1996 estimated tax payments. Total interest paid on
both long-term and short-term debt was $55 million and $44 million in the nine
months ended June 30, 1996 and 1995, 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,
1996 1995
-------- --------
<S> <C> <C>
Raw materials and supplies $ 171.1 $ 127.8
Work-in-process 132.8 113.2
Finished goods 178.1 160.5
------- -------
FIFO inventories 482.0 401.5
LIFO reserve 52.2 42.1
------- -------
LIFO inventories $ 429.8 $ 359.4
======= =======
</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, 1996
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 for the three
months ended June 30, 1996 and 1995 and $4.2 million and $4.3 million for the
nine months ended June 30, 1996 and 1995, 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,
1996 1995 1996 1995
-------- ------- ------- -------
(in millions) (in millions)
<S> <C> <C> <C> <C>
Primary 41.9 41.2 41.8 41.1
Fully diluted 45.0 44.4 44.8 44.4
</TABLE>
6. Acquisition of Business
Effective December 12, 1995, the company completed the acquisition of
approximately 75% of the Roth Freres companies ("Roth") for $175 to $200
million. Roth is a major supplier of seating and interior components to the
European automotive industry. The company used the proceeds of its $125
million, 6.95%, 50-year debentures and short-term debt to finance the
acquisition. The acquisition was accounted for as a purchase.
7. Financial Instruments
In December 1995, the company entered into a seven year amortizing
French Franc ("FRF") cross currency interest rate swap to hedge a portion of
its approximately $200 million of net investments in its French subsidiaries.
Under the swap, the company receives interest based on a fixed U.S. dollar
interest rate of 6.95% on $80 million and pays a fixed FRF interest rate of
7.64% on FRF 400 million. The initial notional principal amounts will remain
outstanding until December 1, 1999. Under the terms of the contract, the
company will pay 100 million FRF in exchange for $20 million on the first
business day in December 1999 and in each of the subsequent three years through
December 2, 2002. On December 2, 2002 the swap will terminate with a final
principal settlement of 100 million FRF paid by the company in exchange for $20
million.
In June, 1996, the company modified the swap agreement such that it
will pay a floating rate, indexed to the level of the six month Deutschemark
LIBOR rate, in FRF.
7
<PAGE> 8
JOHNSON CONTROLS, INC.
FORM 10-Q, June 30, 1996
8. Contingencies
The company is 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.
9. Subsequent Events
On July 18, 1996, the company announced that it will acquire Prince
Automotive, a privately held automotive interiors supplier based in Holland,
Michigan, for $1.35 billion. Prince is a major supplier of interior systems
and components including overhead systems and consoles, door panels, floor
consoles, visors and armrests. The acquisition, subject to regulatory
approvals, is expected to be completed by October 1, 1996 and will be accounted
for as a purchase.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED June 30, 1996
AND June 30, 1995
Consolidated net sales rose 24% over the comparable prior year quarter
to $2,706 million. Double digit sales growth was achieved in three of the four
business segments, with automotive seating the primary contributor to the
overall increase. North American seating sales grew at a rate substantially
higher than industry vehicle production levels of about 3%, due to the
company's participation with new and successful vehicle programs, including
Ford's F-Series truck and Explorer and Chrysler's Jeep Cherokee. Automotive
seating sales in Europe increased significantly, benefiting from the
consolidation of Roth, for which a majority interest was purchased in December,
1995, and the impact of new business, primarily with Ford.
The controls segment's sales of facility services and control systems
were higher than the prior year quarter due to increased activity in the
worldwide existing commercial buildings market. Commercial integrated
facilities management sales were higher worldwide. Retrofit activity in both
North America and Europe and strong construction sales, primarily in the
Pacific Rim, were also higher than the prior year quarter. Orders from the
commercial market during the quarter increased over the comparable prior year
period primarily on the strength of worldwide bookings in the new construction
and retrofit markets.
8
<PAGE> 9
JOHNSON CONTROLS, INC.
FORM 10-Q, June 30, 1996
Plastics segment sales for the third quarter of fiscal 1996 were lower
than the comparable prior year quarter. Shipment increases in single-serve
soft drink containers and non-soft drink (primarily water) units were more than
offset by a decrease in two-liter container sales and competitive pricing
pressures. The pass-through of lower resin prices also contributed to the
decline in sales. Plastics machinery sales were higher than the year ago
period.
The battery segment experienced strong sales growth for the quarter as
a result of an increase in shipments to existing customers reflective of their
market share growth. Higher lead costs, passed through to customers in
pricing, also contributed to the sales increase.
Consolidated operating income for the third quarter of fiscal 1996 of
$138 million represents a 14% improvement over the prior year. Growth in the
automotive segment's income accounted for the majority of the overall
improvement. Operating income in the automotive segment grew as a result of
the increased volumes. Start-up costs associated with the South American and
Far East markets were higher than the year ago period.
Operating income for the controls segment improved at a rate slightly
less than sales as operating margins associated with the segment's rapidly
growing integrated facility management business are lower than those of the
systems installation and service businesses.
The plastics segment experienced significantly lower operating profits
in the quarter reflective of the decline in unit sales, coupled with the costs
associated with excess manufacturing capacity. Capacity utilization rates are
expected to improve in the last fiscal quarter as seasonal demand increases for
bottled water, juice and isotonic drinks materialize as anticipated.
The battery segment's operating income grew at a higher rate than
sales as a result of the growth in unit shipments and continued success in
reducing costs.
Other expense was $11 million for the third quarter of fiscal 1996
compared to $16 million for the prior year. Several factors impacted this
overall reduction. The company recorded income during the quarter (versus
expense in the prior year quarter) associated with the impact of the change in
the company's stock price on stock appreciation rights and deferred
compensation plans. Partially offsetting this was an increase in interest
expense of approximately $5 million due primarily to the financing associated
with the Roth acquisition and the debt assumed with the purchase of Roth.
The effective income tax rate was approximately 41% for the three
month period ended June 30, 1996. This compares with 42% for the year-ago
period. The 1% decrease in the estimated annual effective rate reflects
continued improvement in the company's European operations.
9
<PAGE> 10
JOHNSON CONTROLS, INC.
FORM 10-Q, June 30, 1996
The company's third quarter net income was $69 million, an increase of
25% from the prior year quarter. Earnings available for common shareholders of
$67 million was 26% higher than the prior year quarter. These increases were
primarily due to the improvement in operating income. Primary and fully
diluted earnings per share were $1.60 and $1.51, respectively, for the third
quarter of fiscal 1996, up from $1.28 and $1.21 for primary and fully diluted
earnings per share in fiscal 1995.
COMPARISON OF OPERATING RESULTS FOR THE NINE-MONTH PERIODS ENDED June 30, 1996
AND June 30, 1995
Sales for the nine months ended June 30, 1996 totalled $7,332 million,
an increase of 20% from the year ago period. A large portion of the increase
resulted from a higher level of activity in the automotive seating segment.
Automotive seating sales during the first three quarters of fiscal 1996 were
substantially higher than the year ago period as a result of the company's
participation with new and successful vehicle programs in both North America
and Europe, and the consolidation of Roth.
Controls segment sales of facility services and control systems
increased over the comparable prior year period due to higher sales to the
worldwide existing commercial buildings market. Most of the revenue growth was
associated with integrated facility management service contracts, performance
contracting, and new construction in Europe and the Pacific Rim.
Plastics segment sales decreased slightly from the prior year as
higher unit shipments of single-serve soft drink containers and other custom
units, primarily water, were more than offset by a decline in two-liter soft
drink container shipments and competitive pricing pressures. Plastics
machinery sales were higher than the year ago period.
Sales for the first nine months of fiscal 1996 in the battery segment
were higher than the comparable prior year period. The increase results from
the growth in unit shipments to both replacement and original equipment
customers. The colder winter weather and increased market penetration by the
segment's customers were key contributors to the increase in replacement
battery demand.
Consolidated operating income for the nine months ended June 30, 1996
rose 13% to $335 million. The automotive segment's operating income was higher
than the year ago period. The operating income increase was comparable to the
growth in sales as North American and European margin improvements associated
with established vehicle program efficiencies were offset by start-up costs in
the segment's South American and Far East markets and losses associated with
the March, 1996 General Motors strike.
Operating income for the controls segment improved as a result of the
increased activity in the worldwide existing commercial buildings market. The
increase was not as great as the sales improvement as operating margins
associated with the segment's rapidly growing integrated facility management
business are lower than those of the systems installation and service
businesses.
10
<PAGE> 11
JOHNSON CONTROLS, INC.
FORM 10-Q, June 30, 1996
Plastics income for the first nine months of fiscal 1996 declined
substantially from the prior year, on relatively flat unit volumes, due to
excess manufacturing capacity. The excess capacity resulted from capital
additions made in the second half of fiscal 1995 in anticipation of higher
demand which has not yet materialized.
The battery segment's operating income grew at a higher rate than
sales as unit volume increases were coupled with significant reductions in
operating costs.
Management believes that consolidated sales and operating income for
the remainder of fiscal 1996 will exceed prior year levels. Management
believes that full year sales for the automotive segment will increase
approximately 30%-35% over the prior year as it will continue to benefit from
the consolidation of Roth, participation with successful vehicle models, and
the launch of seating programs, primarily Ford's F-series truck in North
America and Fiesta in Europe. This level of growth is expected despite only a
moderate increase in year-over-year forecasted industry vehicle build schedules
in both North America and Europe. Sales growth of 10%-15% for the year is
expected for the controls segment. The segment has experienced worldwide order
increases, primarily in the retrofit and commercial integrated facilities
management markets. Management believes full year sales for the plastics
segment will be flat compared to the prior year as increases in single-serve
soft drink and non-soft drink demand, primarily for water and hot-fill units,
will only offset the decline in 2-liter soft drink demand and competitive
pricing pressures. The battery segment expects sales to be 10%-15% higher than
fiscal 1995 resulting from an increase in shipments to existing customers
reflective of our customers' increased market penetration.
Other expense was approximately level with the prior year at $43
million, however, there were several noteworthy fluctuations. Interest expense
increased $13 million due primarily to the financing associated with the Roth
acquisition and the debt assumed with the purchase of Roth. Offsetting this
was the recording of income during the first nine months of the fiscal year
(versus expense in the comparable prior year period) associated with the impact
of the change in the company's stock price on stock appreciation rights and
deferred compensation plans. In addition, the company recorded approximately
$7 million more in equity income as compared to the prior year which reflected
losses associated with the Mexican peso devaluation.
The effective income tax rate was 41% for the nine-month period ended
June 30, 1996. This compares to 42% for the year ago period. The decrease is
attributed to improved earnings in the company's European operations.
Net income for the first nine months of fiscal 1996 increased 19% to
$153 million from $129 million for the same period in fiscal 1995. Earnings
available to common shareholders of $146 million exceeded the prior year period
by $24 million or 20%. Primary and fully diluted earnings per share were $3.49
and $3.31, respectively, for the first nine months of fiscal 1996, up from
$2.96 and $2.81 in fiscal 1995.
11
<PAGE> 12
JOHNSON CONTROLS, INC.
FORM 10-Q, June 30, 1996
COMPARISON OF FINANCIAL CONDITION
Cash Flow
Cash provided by operating activities during the nine months ended
June 30, 1996 of $337 million was $107 million higher than the comparable prior
year period, largely due to higher net income adjusted for
depreciation/amortization and other operating items.
Working Capital
The company's working capital totalled $286 million at June 30, 1996,
compared with $154 million and $130 million at September 30, 1995 and June 30,
1995, respectively. The increase in working capital over the comparable prior
year amounts is a result of the increases in accounts receivable and
inventories partially offset by higher levels of accounts payable and
short-term debt. Fluctuations in working capital items reflect the acquisition
of Roth and the higher volumes. Short-term debt increased to fund operating
activities and capital spending.
Capital Expenditures and Other Investments
Capital expenditures for property, plant and equipment were
approximately $261 million during the first nine months of fiscal 1996, down
from $339 million for fiscal 1995. Management projects capital spending for
the full year to approximate $350-$375 million compared to $451 million for
fiscal 1995. Approximately half of the spending has been, and will continue to
be, focused on the automotive segment, and is related to the expansion of
automotive facilities and product lines. In addition, cost reduction projects
continue in all business segments.
Goodwill of $587 million at June 30, 1996 was $68 million higher than
at September 30, 1995 primarily due to the acquisition of Roth at the end of
the company's first fiscal quarter.
Investments in partially-owned affiliates increased $52 million from
the September 30, 1995 balance. First quarter increases related to the
recording of the affiliate investments held by Roth and the initial investment
in a battery segment joint venture in China. During the third quarter, an
investment to establish Intertec Systems was made. Intertec Systems is a joint
venture between the company and Inoac Corporation which will produce instrument
panels and other interior components for major automakers. The company has
recorded $9 million of equity income during the first nine months of fiscal
1996.
12
<PAGE> 13
JOHNSON CONTROLS, INC.
FORM 10-Q, June 30, 1996
Capitalization
The company's total capitalization at June 30, 1996, September 30,
1995 and June 30, 1995 was $2,474 million, $2,168 million and $2,178 million,
respectively. The company's capitalization at June 30, 1996 included
short-term debt of $269 million, long-term debt of $767 million and
shareholders' equity of $1,438 million. Total debt as a percentage of total
capitalization increased to 42% from 38% at the 1995 fiscal year-end and 40%
one year ago. However, it is below the 43% and 44% at the end of the second
and first fiscal quarters, respectively.
Short-term debt increased from both a year ago and September 30, as
previously discussed. Long-term debt reflects the issuance of $125 million,
6.95%, 50-year debentures used to finance the acquisition of Roth.
The company believes its capital resources and liquidity position at
June 30, 1996 are adequate 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
borrowings to meet peak seasonal needs.
Backlog
The unearned backlog of commercial building systems, services and
integrated facilities management contracts to be executed within the next year
at June 30, 1996 was $1,247 million. This compares to $1,122 million at
September 30, 1995 and $1,130 million a year ago. The higher backlog reflects
increased worldwide integrated facilities management and performance
contracting activity.
The unearned backlog of government facilities management contracts,
which reflects only the noncancellable portion of uncompleted contracts, was
$299 million at June 30, 1996. This was lower than the September 30, 1995
balance of $442 million, but slightly higher than the comparable prior year
period of $285 million. The decrease from year end is primarily a result of
the timing of contract renewals.
Pending Acquisition
On July 18, 1996, the company announced that it will acquire Prince
Automotive, a privately held automotive interiors supplier based in Holland,
Michigan, for $1.35 billion. Prince, which is expected to have 1996 sales of
approximately $850 million, is a major supplier of interior systems and
components including overhead systems and consoles, door panels, floor
consoles, visors and armrests. The acquisition, subject to regulatory
approvals, is expected to be completed by October 1, 1996 and will be accounted
for as a purchase. Financing for the acquisition will initially be with
short-term debt; permanent financing alternatives are currently under
consideration.
13
<PAGE> 14
JOHNSON CONTROLS, INC.
FORM 10-Q, June 30, 1996
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, 1995, there have been the following
changes in status:
In the Greenfield, Ohio matter, the company entered into a settlement
agreement with the State of Ohio Environmental Protection Agency resolving the
December 8, 1994 notice of violation alleging non-compliance with state laws
governing air permits and emissions at the company's Greenfield, Ohio facility.
State of Ohio, ex. rel. v. Johnson Controls, Inc., Case No. 96 CV 118 (In the
Court of Common Pleas Highland County, Ohio), filed July 15, 1996. In the
Consent Order also dated July 15, 1996, the company agreed to pay the state a
civil penalty in the amount of $325,000 plus $3,500 in legal fees. The company
will pay this amount in three installments, the final one payable on or before
December 2, 1996. The company settled to avoid costs of potential litigation,
and the company did not admit to any wrongdoing. Upon payment of the above
described amounts, the company anticipates no further liability associated with
this matter.
In the company's appeal of its lawsuit against its insurers to recover
cleanup costs and other damages it may incur at Superfund sites, Johnson
Controls, Inc. v. Employers Insurance of Wausau (Case No. 89-CV-016174), filed
in 1989 in Milwaukee (WI) County Circuit Court, the State of Wisconsin Supreme
Court recently stayed the case pending its decision on similar cases also
pending before the court.
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, 1995, for a description of the results
of votes of security holders at the Annual Meeting of Shareholders held January
24, 1996.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<S> <C>
(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, 1996.
</TABLE>
14
<PAGE> 15
JOHNSON CONTROLS, INC.
FORM 10-Q, June 30, 1996
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 9, 1996 By: Stephen A. Roell
Vice President and
Chief Financial Officer
<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,
-------------------- --------------------
1996 1996 1996 1995
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net Income $69.3 $55.3 $152.7 $128.8
Preferred dividends, net of tax
benefit (2.4) (2.4) (7.1) (7.1)
--------- -------- ---------- --------
Earnings available for common
shareholders $66.9 $52.9 $145.6 $121.7
--------- -------- ---------- --------
Average common stock equivalents
Common stock 41.4 40.9 41.3 40.9
Common stock equivalents -
Assumed execise of stock options 0.5 0.3 0.5 0.2
--------- -------- ---------- --------
41.9 41.2 41.8 41.1
--------- -------- ---------- --------
Primary earnings per share $1.60 $1.28 $3.49 $2.96
========= ======== ========== ========
FULLY DILUTED EARNINGS PER SHARE
Net income $69.3 $55.3 $152.7 $128.8
After tax compensation expense
which would arise from the assumed
conversion of the Series D
Convertible Preferred Stock (1.4) (1.4) (4.2) (4.3)
--------- -------- ---------- --------
Fully diluted earnings $67.9 $53.9 $148.5 $124.5
--------- --------- ---------- --------
Average common shares outstanding
Common stock 41.4 40.9 41.3 40.9
Conversion of Series D outstanding
Prefered Stock 3.1 3.1 3.1 3.1
Common stock equilvalents -
Assumed exercise of stock options 0.5 0.4 0.4 0.4
--------- -------- ---------- --------
45.0 44.4 44.8 44.4
--------- -------- ---------- --------
Fully diluted earnings per share $1.51 $1.21 $3.31 $2.81
========= ======== ========== ========
</TABLE>
16
<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, 1996
-------------------
<S> <C>
Net income $152.7
Provision for income taxes 119.9
Undistributed loss of partially-owned affiliates 2.0
Minority interests in net earnings of subsidiaries 20.0
Amortization of previously capitalized interest 2.7
----------
297.3
----------
Fixed charges:
Interest incurred and amortization of debt expense 64.4
Estimated portion of rent expense 24.5
----------
Fixed charges 88.9
Less: Interest capitalized during period (6.6)
----------
82.3
----------
Earnings $379.6
==========
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
interests), plus (b) fixed charges, minus (c) interest capitalized
during the period. "Fixed charges" consist of (a) interest incurred
and amoritization of debt expense plus (b) the portion of rent expense
representatives of the interest factor.
17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000053669
<NAME> JOHNSON CONTROLS, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 164,300
<SECURITIES> 0
<RECEIVABLES> 1,714,900
<ALLOWANCES> 22,700
<INVENTORY> 429,800
<CURRENT-ASSETS> 2,644,600
<PP&E> 3,244,700
<DEPRECIATION> 1,643,800
<TOTAL-ASSETS> 5,098,900
<CURRENT-LIABILITIES> 2,358,200
<BONDS> 767,300
0
156,000
<COMMON> 7,200
<OTHER-SE> 1,275,100
<TOTAL-LIABILITY-AND-EQUITY> 5,098,900
<SALES> 7,332,300
<TOTAL-REVENUES> 7,332,300
<CGS> 6,335,600
<TOTAL-COSTS> 6,335,600
<OTHER-EXPENSES> 644,900
<LOSS-PROVISION> 2,600
<INTEREST-EXPENSE> 56,600
<INCOME-PRETAX> 292,600
<INCOME-TAX> 119,900
<INCOME-CONTINUING> 152,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 152,700
<EPS-PRIMARY> 3.49
<EPS-DILUTED> 3.31
</TABLE>
