<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, 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 March 31, 1996
- ------------------------------- -----------------------------
Common Stock $.16 2/3 Par Value 41,405,870
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JOHNSON CONTROLS, INC.
FORM 10-Q
March 31, 1996
REPORT INDEX
Page No.
--------
PART I. - FINANCIAL INFORMATION:
Consolidated Statement of Financial Position
at March 31, 1996, September 30, 1995 and
March 31, 1995 ............................................. 3
Consolidated Statement of Income for the Three and
Six-Month Periods Ended March 31, 1996 and 1995 ............ 4
Consolidated Statement of Cash Flows for the Six-
Month Periods Ended March 31, 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 5. Other Information .................................... 14
Item 6. Exhibits and Reports on Form 8-K ..................... 14
SIGNATURES ..................................................... 15
2
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JOHNSON CONTROLS, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
<TABLE>
<CAPTION>
March 31, September 30, March 31,
1996 1995 1995
---------- ------------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 125.1 $ 103.8 $ 129.2
Accounts receivable - net 1,596.3 1,287.5 1,242.7
Inventories 422.6 355.5 368.5
Other current assets 346.8 317.1 263.8
-------- -------- --------
Current assets 2,490.8 2,063.9 2,004.2
Property, plant and equipment - net 1,615.5 1,518.8 1,449.7
Goodwill - net 592.4 519.1 513.0
Investments in partially-owned affiliates 120.8 90.8 95.2
Other noncurrent assets 130.8 128.3 115.1
-------- -------- --------
Total assets $4,950.3 $4,320.9 $4,177.2
======== ======== ========
LIABILITIES AND EQUITY
Short-term debt $ 285.8 $ 130.2 $ 206.4
Current portion of long-term debt 21.7 67.7 71.7
Accounts payable 1,159.3 983.5 917.0
Accrued compensation and benefits 267.8 258.5 235.3
Accrued income taxes 48.7 35.5 42.7
Billings in excess of costs and earnings
on uncompleted contracts 98.7 87.8 90.4
Other current liabilities 353.8 346.3 303.0
-------- -------- --------
Current liabilities 2,235.8 1,909.5 1,866.5
Long-term debt 762.1 630.0 631.9
Postretirement health and other benefits 167.0 168.8 171.5
Other noncurrent liabilities 377.1 272.4 261.9
Shareholders' equity 1,408.3 1,340.2 1,245.4
-------- -------- --------
Total liabilities and equity $4,950.3 $4,320.9 $4,177.2
======== ======== ========
</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 Six Months
Ended March 31, Ended March 31,
-------------------- ------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $2,440.4 $2,050.5 $4,626.7 $3,908.1
Cost of sales 2,130.2 1,762.0 4,003.1 3,342.3
-------- -------- -------- --------
Gross profit 310.2 288.5 623.6 565.8
Selling, general and administrative
expenses 216.9 205.2 426.8 389.9
-------- -------- -------- --------
Operating income 93.3 83.3 196.8 175.9
Interest income 2.0 1.8 3.5 3.3
Interest expense (21.3) (15.7) (36.7) (28.3)
Miscellaneous - net 0.1 (2.2) 1.5 (2.6)
-------- -------- -------- --------
Other income (expense) (19.2) (16.1) (31.7) (27.6)
-------- -------- -------- --------
Income before income taxes and
minority interests 74.1 67.2 165.1 148.3
Provision for income taxes 29.5 27.4 67.7 62.2
Minority interests in net earnings
of subsidiaries 8.2 7.5 14.0 12.6
-------- -------- -------- --------
Net income $36.4 $32.3 $83.4 $73.5
======== ======== ======== ========
Earnings available for common
shareholders $34.1 $30.0 $78.7 $68.8
======== ======== ======== ========
Earnings per share
Primary $0.82 $0.73 $1.89 $1.68
======== ======== ======== ========
Fully diluted $0.78 $0.70 $1.80 $1.60
======== ======== ======== ========
</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 Six Months
Ended March 31,
-------------------------
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $83.4 $73.5
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation 151.5 125.5
Amortization of intangibles 20.8 17.4
Equity in (earnings) losses of partially-
owned affiliates (6.0) 1.5
Noncurrent deferred income taxes (4.0) (8.0)
Other 11.2 (3.3)
Changes in working capital, excluding
acquisition of businesses
Accounts receivable (129.3) (163.5)
Inventories (49.5) (58.0)
Other current assets (15.0) 12.5
Accounts payable and accrued liabilities 65.5 65.4
Accrued income taxes 13.7 3.5
Billings in excess of costs and earnings
on uncompleted contracts 11.7 13.4
------ -------
Cash provided by operating activities 154.0 79.9
------ -------
INVESTING ACTIVITIES
Capital expenditures (183.0) (230.3)
Sale of property, plant and equipment 12.0 10.7
Acquisition of businesses (119.0) (23.6)
Change in long-term investments - net (10.6) 4.8
Reversion of pension assets 0.7 0.1
------ -------
Cash used by investing activities (299.9) (238.3)
------ -------
FINANCING ACTIVITIES
Increase in short-term debt 130.5 178.4
Issuance of long-term debt 154.5 212.6
Repayment of long-term debt (79.9) (201.0)
Payment of cash dividends (39.9) (38.3)
Other 2.0 3.3
------ -------
Cash provided by financing activities 167.2 155.0
------ -------
Increase (decrease) in cash and cash equivalents $21.3 ($3.4)
====== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 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
six months ended March 31, 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 six months ended March 31, 1996 and
1995 (net of income tax refunds) totalled approximately $33 million and $63
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 $32 million and $26 million in the six
months ended March 31, 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>
March 31,
1996 1995
-------- --------
<S> <C> <C>
Raw materials and supplies $ 158.3 $ 124.5
Work-in-process 128.0 118.9
Finished goods 188.5 167.2
------- -------
FIFO inventories 474.8 410.6
LIFO reserve 52.2 42.1
------- -------
LIFO inventories 422.6 368.5
======= =======
</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, 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 March 31, 1996 and 1995 and $2.8 million and $2.9 million for the
six months ended March 31, 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 Six Months Ended
March 31, March 31,
1996 1995 1996 1995
-------- ------- ------- -------
(in millions) (in millions)
<S> <C> <C> <C> <C>
Primary 41.8 41.0 41.7 41.0
Fully diluted 45.0 44.2 44.9 44.2
</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. 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.
7
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1996
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED MARCH 31,
1996 AND MARCH 31, 1995
Consolidated net sales rose 19% over the comparable prior year quarter to
$2,440 million. Double digit sales growth was achieved in three of the four
business segments, with automotive seating the primary contributor to the
overall increase. Automotive seating sales in Europe increased significantly,
benefiting from the consolidation of Roth Freres ("Roth"), for which a majority
interest was purchased in December, 1995, and the impact of new business,
primarily with Ford. In North America, sales were higher than the prior year
quarter despite an approximate 11% reduction in industry vehicle production.
This was 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. The increase was partially offset by the impact of lost production
associated with a strike at General Motors which idled five of the company's
complete seat assembly plants.
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 in North America and in Europe, which benefited
from the March 1995 acquisition of the Atomic Energy Authority contracts in the
United Kingdom ("U.K."). Retrofit activity in North America and strong
construction sales, primarily in Europe and the Pacific Rim, were also higher
than the prior year quarter. Orders from the commercial market increased over
the comparable prior year period primarily on the strength of worldwide bookings
in the installation, scheduled service and integrated facilities management
markets.
Plastics segment sales for the second quarter of fiscal 1996 were
relatively flat compared to the 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. Plastics
machinery sales were higher than the year ago period.
The battery segment's sales growth over the prior year quarter resulted
from an increase in shipments due to the slightly colder winter weather,
increased customer retail outlets, new brand introductions and agreements to
supply replacement batteries to automobile dealerships.
Consolidated operating income for the second quarter of fiscal 1996 of
$93 million represents a 12% improvement over the prior year. Increases in the
automotive seating and battery segments accounted for the majority of the
overall improvement. Operating income in the automotive segment grew at a
lower rate than sales as a result of losses associated with the General Motors
strike.
8
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1996
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 lower operating profits in the quarter
despite the flat sales as cost reductions did not fully offset the costs
associated with excess manufacturing capacity. Capacity utilization rates are
expected to improve in the second half of the year if seasonal demand increases
for bottled water, juice and isotonic drinks materialize as anticipated.
The battery segment had operating income in the quarter as compared to a
slight operating loss in the prior year. This resulted from the growth in unit
shipments and continued success in reducing costs.
Other expense was $19 million for the second quarter of fiscal 1996
compared to $16 million for the prior year. Several factors impacted this
overall increase. Interest expense increased $6 million due primarily to the
financing associated with the Roth acquisition and the debt assumed with the
purchase of Roth. The company also recorded higher stock appreciation rights
and deferred compensation costs associated with the changes in the company's
common stock price. Partially offsetting these was the recognition of equity
income during the quarter as compared to a loss in the prior year which
resulted from the Mexican peso devaluation.
The effective income tax rate was approximately 40% for the three
month period ended March 31, 1996. This compares with 41% for the year-ago
period. Each quarterly rate reflects the adjustment required to provide a
year-to-date effective rate of 41% and 42%, respectively. The 1% decrease in
the estimated annual effective rate reflects continued improvement in the
company's European operations.
The company's second quarter net income was $36 million, an increase of
13% from the prior year quarter. Earnings available for common shareholders of
$34 million was 14% 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 $.82 and $.78, respectively, for the second
quarter of fiscal 1996, up from $.73 and $.70 for primary and fully diluted
earnings per share in fiscal 1995.
9
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1996
COMPARISON OF OPERATING RESULTS FOR THE SIX-MONTH PERIODS ENDED MARCH 31, 1996
AND MARCH 31, 1995
For the six months ended March 31, 1996, sales totalled $4,627 million,
an increase of 18% from the year ago period. A substantial portion of the
increase resulted from a higher level of activity in the automotive seating
segment. Automotive seating sales for the first half of the fiscal year were
higher than the prior year due to 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
during the first half of fiscal 1996 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 were approximately level with the prior year as
higher unit shipments of single-serve soft drink containers and other custom
units, primarily water, were offset by a decline in two-liter soft drink
container shipments. Plastics machinery sales were higher than the year ago
period.
Sales for the first six 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 rose 12% during the first half of fiscal
1996, to $197 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 margin improvements associated with established
vehicle program efficiencies were offset by the losses associated with the
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.
Plastics income for the first half of fiscal 1996 declined substantially
from the prior year, on flat unit volumes, due to excess manufacturing
capacity. The favorable impact of cost reduction efforts have not yet offset
the costs associated with the excess capacity which resulted from capital
additions made in the second half of fiscal 1995 in anticipation of higher
demand which has not 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.
10
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1996
Management believes that consolidated sales and operating income for the
remainder of fiscal 1996 will continue to exceed prior year levels. Management
believes the automotive segment's sales will increase approximately 22%-27%
over the prior year as it will continue to benefit from 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 growth is
expected despite flat year-over-year forecasted industry vehicle build
schedules in both North America and Europe. In addition, the acquisition of
Roth will have a favorable impact on the current year's results. 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 integrated
facilities management markets. Management believes full year results for the
plastics segment will benefit from increases in single-serve soft drink and
non-soft drink demand, primarily for water and hot-fill units. A 5%-10%
improvement in sales is anticipated. The battery segment expects sales to be
5%-10% higher than fiscal 1995 resulting from an increase in shipments to
existing customers reflective of our customer's increased market penetration.
Other expense increased approximately $4 million, to $32 million for the
first six months of fiscal 1996. Several factors impacted this overall
increase. Interest expense increased $8 million due primarily to the financing
associated with the Roth acquisition and the debt assumed with the purchase of
Roth. The company also recorded higher stock appreciation rights and deferred
compensation costs associated with the changes in the company's common stock
price. Partially offsetting these was the recognition of equity income
compared to a loss in the prior year which resulted from the Mexican peso
devaluation.
The effective income tax rate was 41% for the six-month period ended
March 31, 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 six months of fiscal 1996 increased 13% to $83
million from $74 million for the first half of fiscal 1995. Earnings available
to common shareholders of $79 million exceeded the prior year period by $10
million or 14%. Primary and fully diluted earnings per share were $1.89 and
$1.80, respectively, for the first half of fiscal 1996, up from $1.68 and $1.60
in fiscal 1995.
COMPARISON OF FINANCIAL CONDITION
Cash Flow
Cash provided by operating activities during the six months ended
March 31, 1996 of $154 million was $74 million higher than the comparable prior
year period, primarily due to higher net income adjusted for
depreciation/amortization and other operating items.
11
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1996
Working Capital
The company's working capital totalled $255 million at March 31, 1996,
compared with $154 million and $138 million at September 30, 1995 and March 31,
1995, respectively. The increase in working capital over the comparable prior
year amounts is primarily 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 primarily 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
$183 million during the first six months of fiscal 1996, down from $230 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 $592 million at March 31, 1996 was $73 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 $30 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. The company has recorded $6 million of
equity income during the first half of fiscal 1996.
Capitalization
The company's total capitalization at March 31, 1996, September 30, 1995
and March 31, 1995 was $2,478 million, $2,168 million and $2,155 million,
respectively. The company's capitalization at March 31, 1996 included
short-term debt of $308 million, long-term debt of $762 million and
shareholders' equity of $1,408 million. Total debt as a percentage of total
capitalization increased to 43% from 38% at the 1995 fiscal year-end and 42%
one year ago. However, it is below the 44% at the end of the first fiscal
quarter. The company anticipates this ratio will fall below 40% by the end of
fiscal 1996.
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
March 31, 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.
12
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1996
Backlog
The unearned backlog of commercial building systems, services and
integrated facilities management contracts to be executed within the next year
at March 31, 1996 was $1,120 million. Backlog was flat compared to September
30, 1995 and higher than a year ago as a result of 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 $321
million at March 31, 1996. This was lower than both at September 30 and the
comparable prior year period as a result of 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, 1995, there have been the following
changes in status:
In Gould, Inc. v. NL Industries, Inc., Case No. CV 91-1091 JE
(United States District Court for the District of Oregon), filed December,
1992, plaintiff is the owner of a site once used for secondary lead smelting.
It has sued certain site customers (including the company), the former owner
and several owners of adjacent properties seeking an allocation among them of
cleanup costs associated with the site. Plaintiff and many of the defendants
are performing work at the site pursuant to an administrative order issued on
January 23, 1992. Approximately $24 million has been expended by the parties
at the site to date, and the United States Environmental Protection Agency
(EPA) on March 29, 1996 issued a Record of Decision (ROD) that estimates the
remaining cost to complete the cleanup to range from $10 million to $13
million.
In Schuylkill Metals of Plant City, Inc. v. Johnson Controls, Inc., Case
No. 95-610-CN-T-23B (United States District Court for the Middle District of
Florida), filed in April, 1995, plaintiff is the owner of property once used
as a battery breaking facility. Plaintiff contended that the company was a
major customer and should pay an unspecified, equitable share of the estimated
$20 million the plaintiff expects to spend cleaning up the site. Plaintiff and
the company have settled this lawsuit, and the Court dismissed the case on
April 17, 1996. The company anticipates no further liability associated with
this matter.
13
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JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 1996
In the company's lawsuit against its insurers to recover cleanup
costs and other damages it may incur at many of the sites, Johnson Controls,
Inc. v Employers Insurance of Wausau (Case No. 89-CV-016174), filed in 1989 in
Milwaukee County Circuit Court, the company is seeking its costs of defense and
indemnity payments under its insurance policies and also a declaratory judgment
for future damages. In 1994, the Wisconsin Supreme Court ruled that many types
of cleanup costs are not recoverable under common comprehensive general
liability insurance policies, such as the policies at issue in the company's
case. In 1995, the Milwaukee County Circuit Court decided that the Supreme
Court's ruling applies to the company's case against its insurers in all
respects and found for the insurers. The company has appealed the Milwaukee
County Circuit Court decision, and the insurers have recently requested the
Supreme Court to bypass the Court of Appeals and hear the case without waiting
for a decision at the intermediate appellate level.
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 5. Other Information
(a) Patrick J. Dennis was named Controller and was elected
a Corporate Officer in January, 1996. Since joining
the company in 1983, Mr. Dennis has held controller
responsibilities for the Automotive Systems Group and
Plastics Technology Group.
(b) Subhash (Sam) S. Valanju was named Chief Information
Officer and was elected a Corporate Officer effective
March, 1996. Prior to joining the company in March,
Mr. Valanju was Director of Management Information
Systems for the Troy, Michigan-based Rockwell
Automotive division of Rockwell International
Corporation, which he joined in 1985.
(c) Michael P. O'Rourke, Assistant Secretary, left the
company
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 March 31, 1996.
14
<PAGE> 15
JOHNSON CONTROLS, INC.
FORM 10-Q, MARCH 31, 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: May 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 Six Months
-------------------- ------------------
Ended March 31, Ended March 31,
1996 1995 1996 1995
----------- -------- -------- ---------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Net Income $36.4 $32.3 $83.4 $73.5
Preferred dividends, net of tax
benefit (2.3) (2.3) (4.7) (4.7)
----- ----- ----- -----
Earnings available for common
shareholders $34.1 $30.0 $78.7 $68.8
----- ----- ----- -----
Average common shares outstanding
Common stock 41.3 40.8 41.2 40.8
Common stock equivalents -
Assumed exercise of stock options 0.5 0.2 0.5 0.2
----- ----- ----- -----
41.8 41.0 41.7 41.0
----- ----- ----- -----
Primary earnings per share $0.82 $0.73 $1.89 $1.68
===== ===== ===== =====
FULLY DILUTED EARNINGS PER SHARE
Net Income $36.4 $32.3 $83.4 $73.5
After tax compensation expense
which would arise from the assumed
conversion of the Series D
Convertible Preferred Stock (1.4) (1.4) (2.8) (2.9)
----- ----- ----- -----
Fully diluted earnings $35.0 $30.9 $80.6 $70.6
----- ----- ----- -----
Average common shares outstanding
Common stock 41.3 40.8 41.2 40.8
Conversion of Series D Convertible
Preferred Stock 3.1 3.2 3.1 3.2
Common stock equivalents -
Assumed exercise of stock options 0.6 0.2 0.6 0.2
----- ----- ----- -----
45.0 44.2 44.9 44.2
----- ----- ----- -----
Fully diluted earnings per share $0.78 $0.70 $1.80 $1.60
===== ===== ===== =====
</TABLE>
16
<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, 1996
--------------------
<S> <C>
Net income $83.4
Provision for income taxes 67.7
Undistributed loss of partially-owned affiliates 0.1
Minority interests in net earnings of subsidiaries 14.0
Amortization of previously capitalized interest 1.8
------
167.0
------
Fixed charges:
Interest incurred and amortization of debt expense 43.7
Estimated portion of rent expense 16.3
------
Fixed charges 60.0
Less: Interest capitalized during period (4.6)
------
55.4
------
Earnings $222.4
======
Ratio of earnings to fixed charges 3.7
======
</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.
17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000053669
<NAME> JOHNSON CONTROLS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 125,100
<SECURITIES> 0
<RECEIVABLES> 1,618,500
<ALLOWANCES> 22,200
<INVENTORY> 422,600
<CURRENT-ASSETS> 2,490,800
<PP&E> 3,215,600
<DEPRECIATION> 1,600,100
<TOTAL-ASSETS> 4,950,300
<CURRENT-LIABILITIES> 2,235,800
<BONDS> 762,100
0
157,100
<COMMON> 7,200
<OTHER-SE> 1,244,000
<TOTAL-LIABILITY-AND-EQUITY> 4,950,300
<SALES> 4,626,700
<TOTAL-REVENUES> 4,626,700
<CGS> 4,003,100
<TOTAL-COSTS> 4,003,100
<OTHER-EXPENSES> 418,700
<LOSS-PROVISION> 3,100
<INTEREST-EXPENSE> 36,700
<INCOME-PRETAX> 165,100
<INCOME-TAX> 67,700
<INCOME-CONTINUING> 83,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,400
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.80
</TABLE>
