<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: March 7, 1997
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
<PAGE> 2
Item 5: OTHER EVENTS
Attached for filing with the commission are the financial statements,
management's discussion and analysis, and selected financial data of Johnson
Controls, Inc. (JCI or the Company) for the year ended September 30, 1996. The
financial statements have been reclassified to identify separately the results
of operations, financial position and cash flows of the Company's discontinued
Plastic Container division (PCD).
On December 6, 1996, JCI and Schmalbach-Lubeca AG/Continental Can Europe (a
member of the VIAG Group) signed a definitive agreement under which
Schmalbach-Lubeca would purchase PCD. The transaction was completed on
February 28, 1997.
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 hereunto duly authorized.
JOHNSON CONTROLS, INC.
Date: March 7, 1997 By: Stephen A. Roell
Vice President and
Chief Financial Officer
<PAGE> 3
Index to Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
Report of Independent Accountants
Consolidated Statement of Income for the years ended
September 30, 1996, 1995 and 1994
Consolidated Statement of Financial Position as of
September 30, 1996 and 1995
Consolidated Statement of Cash Flows for the years ended
September 30, 1996, 1995 and 1994
Consolidated Statement of Shareholders' Equity for the years ended
September 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Financial Statement Schedule
For the years ended September 30, 1996, 1995 and 1994:
II. Valuation and Qualifying Accounts
(2) Quarterly Financial Data (unaudited)
(3) Management's Discussion and Analysis
(4) Selected Financial Data (Five Year Summary)
(5) Exhibits
(23) Consent of Independent Accountants
(27) Financial Data Schedule (electronic filing only)
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Johnson Controls, Inc.
In our opinion, the consolidated financial statements as listed in the
accompanying index present fairly, in all material respects, the financial
position of Johnson Controls, Inc. and its subsidiaries at September 30, 1996
and 1995, and the results of their operations and their cash flows for each of
the three years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
October 21, 1996, except as to Note 13
which is as of December 6, 1996 and
Note 14 which is as of March 7, 1997
<PAGE> 5
Johnson Controls, Inc.
Consolidated Statement of Income
<TABLE>
<CAPTION>
Year ended September 30,
(in millions, except per share data) 1996 1995 1994
--------------------------------
<S> <C> <C> <C>
Net sales $9,210.0 $7,400.7 $6,111.7
Cost of sales 7,878.3 6,236.0 5,097.9
--------------------------------
Gross profit 1,331.7 1,164.7 1,013.8
Selling, general and administrative expenses 852.8 769.6 702.4
--------------------------------
Operating income 478.9 395.1 311.4
Interest income 7.9 7.1 4.4
Interest expense (73.4) (53.7) (38.5)
Miscellaneous - net 8.1 (10.2) (2.5)
--------------------------------
Other income (expense) (57.4) (56.8) (36.6)
--------------------------------
Income before income taxes and minority interests 421.5 338.3 274.8
Provision for income taxes 171.8 143.0 119.6
Minority interests in net earnings of subsidiaries 27.0 27.3 20.4
--------------------------------
Income from continuing operations 222.7 168.0 134.8
Discontinued operations
Income from discontinued operations, less applicable
provision for income taxes of $9.8, $19.9, and
$20.6, respectively, and minority interests 12.0 27.8 30.4
--------------------------------
Net income $ 234.7 $ 195.8 $ 165.2
================================
Earnings available for common shareholders $ 225.2 $ 186.4 $ 155.9
================================
Earnings per share from continuing operations
Primary $ 2.55 $ 1.93 $ 1.53
================================
Fully diluted $ 2.42 $ 1.82 $ 1.46
================================
Earnings per share from discontinued operations
Primary $ 0.14 $ 0.33 $ 0.37
================================
Fully diluted $ 0.13 $ 0.31 $ 0.34
================================
Earnings per share
Primary $ 2.69 $ 2.26 $ 1.90
================================
Fully diluted $ 2.55 $ 2.13 $ 1.80
================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 6
Johnson Controls, Inc.
Consolidated Statement of Financial Position
<TABLE>
<CAPTION>
September 30,
(in millions) 1996 1995
---------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 165.2 $ 80.5
Accounts receivable, less allowance for doubtful
accounts of $20.9 and $18.6, respectively 1,589.0 1,180.3
Inventories 344.7 277.2
Net assets of discontinued operations 440.7 466.6
Other current assets 309.5 297.7
---------------------
Current assets 2,849.1 2,302.3
Property, plant and equipment - net 1,320.2 1,134.6
Goodwill, less accumulated amortization of $127.2 and $104.6, respectively 548.2 464.8
Investments in partially-owned affiliates 128.4 90.8
Other noncurrent assets 145.3 155.1
---------------------
Total assets $4,991.2 $4,147.6
=====================
Liabilities and Equity
Short-term debt $ 248.1 $ 130.2
Current portion of long-term debt 33.2 65.3
Accounts payable 1,178.2 854.1
Accrued compensation and benefits 238.4 247.9
Accrued income taxes 44.0 33.7
Billings in excess of costs and earnings on uncompleted contracts 83.6 87.8
Other current liabilities 357.1 335.6
---------------------
Current liabilities 2,182.6 1,754.6
Long-term debt 752.2 619.3
Postretirement health and other benefits 167.9 167.4
Other noncurrent liabilities 380.7 266.1
Shareholders' equity 1,507.8 1,340.2
---------------------
Total liabilities and equity $4,991.2 $4,147.6
=====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 7
Johnson Controls, Inc.
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Year ended September 30,
(in millions) 1996 1995 1994
---------------------------
<S> <C> <C> <C>
Operating Activities
Income from continuing operations $222.7 $168.0 $134.8
Adjustments to reconcile income from continuing operations to
cash provided by operating activities of continuing operations
Depreciation 226.6 191.7 169.3
Amortization of intangibles 35.9 27.4 21.8
Equity in earnings of partially-owned affiliates (15.9) (1.6) (9.4)
Deferred income taxes 34.3 1.7 (9.6)
Other 11.1 (1.3) 1.3
Changes in working capital, excluding acquisition of businesses
Accounts receivable (202.4) (217.2) (94.2)
Inventories (43.1) (19.3) (13.6)
Other current assets (9.3) (37.2) (23.2)
Accounts payable and accrued liabilities 160.6 185.7 172.5
Accrued income taxes (14.5) (11.7) (11.2)
Billings in excess of costs and earnings on
uncompleted contracts (3.5) 10.8 (1.1)
--------------------------
Cash provided by operating activities of continuing operations 402.5 297.0 337.4
Cash provided by operating activities of discontinued operations 65.1 73.2 109.8
--------------------------
Cash provided by operating activities 467.6 370.2 447.2
--------------------------
Investing Activities
Capital expenditures (322.3) (330.9) (261.7)
Sale of property, plant and equipment 12.3 8.9 15.9
Acquisition of businesses (148.3) (30.6) (167.9)
Additions of long-term investments (12.5) (5.5) (18.2)
Proceeds from long-term investments 11.9 15.2 11.5
Investing activities of discontinued operations (49.1) (109.4) (76.9)
Other 0.7 0.3 0.2
---------------------------
Cash used by investing activities (507.3) (452.0) (497.1)
===========================
Financing Activities
Increase (decrease) in short-term debt 101.1 107.1 (17.5)
Issuance of long-term debt 155.4 218.8 202.8
Repayment of long-term debt (83.7) (206.8) (26.5)
Payment of cash dividends (80.0) (76.3) (71.4)
Net financing activities of discontinued operations 24.4 (12.6) (7.9)
Other 6.9 9.7 4.4
---------------------------
Cash provided by financing activities 124.1 39.9 83.9
Effect of exchange rate changes on cash and cash equivalents 0.3 0.5 3.0
---------------------------
Increase (decrease) in cash and cash equivalents $84.7 ($41.4) $37.0
===========================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 8
Johnson Controls, Inc.
Consolidated Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Unearned Capital in Treasury Cumulative
Preferred Compensation Common Excess of Retained Stock Translation
Total Stock ESOP Stock Par Value Earnings at Cost Adjustments
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(in millions)
at September 30, 1993 $1,079.0 $168.1 ($153.4) $7.0 $503.0 $633.3 ($55.1) ($23.9)
Net income 165.2 -- -- -- -- 165.2 -- --
Reduction of guaranteed ESOP
debt 6.8 -- 6.8 -- -- -- -- --
Cash dividends
Series D preferred (3.97 per
one ten-thousandth of a share).
net of $3.6 million tax benefit (9.3) -- -- -- -- (9.3) -- --
Common ($.72 per share) (58.5) -- -- -- -- (58.5) -- --
Translation adjustments 16.4 -- -- -- -- -- -- 16.4
Other, including options exercised 3.2 (4.0) -- 0.1 6.9 -- 0.2 --
-----------------------------------------------------------------------------------------------
at September 30, 1994 1,202.8 164.1 (146.6) 7.1 509.9 730.7 (54.9) (7.5)
Net income 195.8 -- -- -- -- 195.8 -- --
Reduction of guaranteed ESOP
debt 7.9 -- 7.9 -- -- -- -- --
Cash dividends
Series D preferred (3.97 per
one ten-thousandth of a share).
net of $3.1 million tax benefit (9.4) -- -- -- -- (9.4) -- --
Common ($.78 per share) (63.8) -- -- -- -- (63.8) -- --
Translation adjustments 0.3 -- -- -- -- -- -- 0.3
Other, including options exercised 6.6 (4.0) -- -- 10.6 -- -- --
-------------------------------------------------------------------------------------------------
at September 30, 1995 1,340.2 160.1 (138.7) 7.1 520.5 853.3 (54.9) (7.2)
Net income 234.7 -- -- -- -- 234.7 -- --
Reduction of guaranteed ESOP
debt 9.0 -- 9.0 -- -- -- -- --
Cash dividends
Series D preferred (3.97 per
one ten-thousandth of a share).
net of $2.7 million tax benefit (9.5) -- -- -- -- (9.5) -- --
Common ($.82 per share) (67.8) -- -- -- -- (67.8) -- --
Translation adjustments (13.8) -- -- -- -- -- -- (13.8)
Two-for-one split of common stock -- -- -- 7.2 (7.2) -- -- --
Other, including options exercised 15.0 (5.5) -- 0.1 14.5 -- 5.9 --
-------------------------------------------------------------------------------------------------
at September 30, 1996 $1,507.8 $154.6 ($129.7) $14.4 $527.8 $1,010.7 ($49.0) ($21.0)
=================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 9
Johnson Controls, Inc.
Notes to Consolidated Financial Statements
Summary of Significant Accounting Policies
Principles of Consolidation:
The consolidated financial statements include the accounts of Johnson Controls,
Inc. and its majority-owned domestic and foreign subsidiaries. All significant
intercompany transactions have been eliminated, investments in partially-owned
affiliates are accounted for by the equity method when the Company's interest
exceeds 20%. Gains and losses from the translation of most foreign currency
financial statements are accumulated as a separate component of shareholders'
equity.
Reclassification:
The accompanying consolidated financial statements for 1996, 1995 and 1994 have
been reclassified to identify separately the results of operations, financial
position and cash flows of the Company's discontinued Plastic Container
division. (See Note 13).
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect reported amounts and related disclosures. Actual results could
differ from those estimates.
Inventories:
Inventories are valued at the lower of cost or market. Cost is determined using
the last-in, first-out (LIFO) method for most inventories at domestic
locations. Cost of other inventories is determined on the first-in, first-out
(FIFO) method.
Property, Plant and Equipment:
The Company uses the straight-line method of depreciation for financial
reporting purposes and accelerated methods for income tax purposes. The
general range of useful lives for financial reporting is 10 to 50 years for
buildings and improvements and 3 to 20 years for machinery and equipment.
Intangibles:
Goodwill arising from business acquisitions is amortized using the straight-line
method over periods of 15 to 40 years. Patents and other intangibles are
amortized over their estimated lives. The Company reviews the carrying value
of goodwill for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Measurement of any impairment
would include a comparison of estimated future operating cash flows
anticipated to be generated during the remaining life of the goodwill to the net
carrying value of goodwill.
Revenue Recognition:
The Company recognizes revenue from long-term contracts of the controls segment
over the contractual period under the percentage-of-completion method of
accounting (see "Long-Term Contracts"). In all other cases, the Company
recognizes revenue at the time products are shipped or as services are
performed.
Long-Term Contracts:
Under the percentage-of-completion method of accounting used for long-term
contracts, sales and gross profit are recognized as work is performed based on
the relationship between actual costs incurred and total estimated costs at
completion. Sales and gross profit are adjusted prospectively for revisions in
estimated total contract costs and contract values. Estimated losses are
recorded when identified. Claims against customers are recognized as revenue
upon settlement. The amount of accounts receivable due after one year is not
significant.
Earnings Per Share:
Primary earnings per share are computed by dividing net income, after deducting
dividend requirements on the Series D Convertible Preferred Stock, by the
weighted average number of common shares and common stock equivalents which
would arise from the exercise of stock options. Fully diluted earnings are
computed by deducting from net income the after-tax compensation expense which
would arise from the assumed conversion of the Series D Convertible Preferred
Stock, which was $5.6 million, $5.8 million and $5.9 million in 1996, 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.
<PAGE> 10
The weighted average number of shares used in the primary and fully diluted
earnings per share computations were as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
(in millions of shares)
1996 1995 1994
<S> <C> <C> <C>
Primary 83.6 82.3 82.1
Fully diluted 89.9 89.1 88.5
</TABLE>
Cash Flow:
For purposes of the Consolidated Statement of Cash Flows, the Company
considers all investments with a maturity of three months or less at the time
of purchase to be cash equivalents.
Future Accounting Changes:
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
This Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. The Statement is effective for the Company's 1997
fiscal year. The financial statement effect of adoption is currently under
review.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock Based
Compensation." This Statement requires either recognition of compensation
expense in the financial statements for those companies that adopt the fair
value based accounting method or expanded disclosure of pro forma net income and
earnings per share information for those companies that retain the current
accounting method set forth in Accounting Principles Board (APB) Opinion 25,
"Accounting for Stock Issued to Employees." The Company plans to retain the
current accounting method set forth in APB 25 and will begin expanded
disclosure in its fiscal 1997 financial statements.
<PAGE> 11
Note 1 - Inventories
<TABLE>
<CAPTION>
September 30,
(in millions) 1996 1995
-------------------
<S> <C> <C>
Raw materials and supplies $155.8 $113.3
Work in process 94.7 90.5
Finished goods 136.3 118.2
-----------------
FIFO inventories 386.8 322.0
LIFO reserve (42.1) (44.8)
-----------------
LIFO inventories $344.7 $277.2
=================
</TABLE>
Inventories valued by the LIFO method of accounting were approximately 47% and
52% of total inventories at September 30, 1996 and 1995, respectively.
<PAGE> 12
Note 2 - Property, Plant and Equipment
<TABLE>
<CAPTION>
September 30,
(in millions) 1996 1995
-------------------
<S> <C> <C>
Buildings and improvements $669.9 $540.7
Machinery and equipment 1,743.4 1,538.2
Construction in progress 141.7 169.4
-----------------
2,555.0 2,248.3
Land 63.5 52.6
-----------------
2,618.5 2,300.9
Less accumulated depreciation (1,298.3) (1,166.3)
------------------
Property, plant and equipment - net $1,320.2 $1,134.6
==================
</TABLE>
Interest costs capitalized during 1996, 1995, and 1994 were $5.3 million, $7.9
million and $4.2 million, respectively.
<PAGE> 13
Note 3 - Leases
Certain administrative and production facilities and equipment are leased under
long-term agreements. Most leases contain renewal options for varying periods,
and certain leases include options to purchase the leased property during or at
the end of the lease term. Leases generally require the Company to pay for
insurance, taxes and maintenance of the property. Leased capital assets
included in net property, plant and equipment, primarily buildings and
improvements, were $31 million and $18 million at September 30, 1996 and 1995,
respectively.
Other facilities and equipment are leased under arrangements which are
accounted for as operating leases. Total rental expense was $83 million in
1996, and $71 million in 1995 and $55 million in 1994.
Future minimum capital and operating lease payments and the related present
value of capital lease payments at September 30, 1996 were as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
-------------------
<S> <C> <C>
(in millions)
1997 $ 4.1 $ 56.8
1998 3.9 43.8
1999 4.0 31.2
2000 4.0 19.2
2001 3.9 10.6
After 2001 19.7 49.4
----------------
Total minimum lease payments 39.6 $211.0
======
Interest 12.5
-----
Present value of net minimum lease payments $27.1
=====
</TABLE>
<PAGE> 14
Note 4 - Short-term Debt and Credit Agreements
Short-term debt at September 30, 1996 and 1995 consisted entirely of
bank borrowings. At September 30, 1996, the Company had unsecured lines of
credit available from banks totalling $2,028 million. The lines of credit are
subject to the usual terms and conditions applied by banks. Domestic lines of
credit totalling $1,605 million are available for support of outstanding
commercial paper including $1,100 million, expiring in September 1997, to
support the interim financing for the Prince acquisition (see Note 13). The
average short-term debt outstanding during 1996 and 1995 was $339 million and
$206 million, respectively. The weighted average interest rate on short-term
debt outstanding at September 30, 1996 and 1995 was 5.30% and 5.76%,
respectively. Total interest paid on both long-term and short-term debt was $76
million, $63 million and $41 million in 1996, 1995 and 1994, respectively.
<PAGE> 15
Note 5 - Long-term Debt
<TABLE>
<CAPTION>
September 30,
(in millions) 1996 1995
-----------------
<S> <C> <C>
Unsecured notes
6.15% due in 1996 $ - $ 30.0
6.92% due in 1998 30.0 30.0
7.7% due in 2015 124.8 124.8
8.2% due in 2024 125.0 125.0
6.95% due in 2045 125.0 -
Industrial revenue bonds due through
2006, net of unamortized discount
of $2.6 million in 1996 and
$3.0 million in 1995 51.0 51.4
Medium-term notes due in 1997 and 1999
at an average interest rate of 7.4% 103.0 123.0
Guaranteed ESOP debt due in increasing
annual installments through 2004 at
an average interest rate of 7.24%
(tied in part to LIBOR) 129.7 138.7
Capital lease obligations 27.1 18.4
Other 69.8 43.3
-----------------
785.4 684.6
Less current portion 33.2 65.3
-----------------
Long-term debt $752.2 $619.3
=================
</TABLE>
In December 195, the Company issued $125 million of 6.95%, 50 year debentures.
In March 1995, the Comapny refinanced its $150 million, 8.875% debentures due in
1998 by issuing $125 million of 7.7% debentures due in 2015 and $30 million of
6.92% private placement notes due in 1998.
Industrial revenue bond financed facilities have been accounted for as plant and
equipment. The related bonds issued by the government units are recorded as
long-term debt. Fixed rate industrial revenue bonds totalling $27 million at
September 30, 1996 and 1995 had a weighted average interest rate of 6.3%.
Variable rate bonds of $27 million at September 30, 1996 and 1995 had weighted
average interest rates of 4.1% and 4.7%, respectively.
In 1989 the Company established an employee stock ownership plan (ESOP). The
ESOP was financed with $175 million of debt issued by the ESOP. The ESOP debt
is guaranteed by the Company as to payment of principal and interest and,
therefore, the unpaid balance has been recorded as long-term debt. The
dividends on the Series D Preferred Stock held by the ESOP plus Company
contributions to the ESOP are used by the ESOP to service the debt. Therefore,
interest incurred on the ESOP debt of $10 million for each of the years 1996,
1995, and 1994 has not been reflected as interest expense in the Company's
Consolidated Statement of income.
The installments of long-term debt maturing in each of the next five years
(including the guaranteed ESOP debt) are: 1997 - $33 million, 1998 - $106
million, 1999 - $21 million, 2000 - $85 million and 2001 - $21 million.
The indentures for the unsecured notes and the guaranteed ESOP debt include
various financial covenants, none of which are expected to restrict future
operations.
<PAGE> 16
Note 6 - Financial Instruments
The fair values of cash and cash equivalents and short-term debt approximate
their carrying values. The fair value of long-term debt which was $757 million
and $654 million at September 30, 1996 and 1995, respectively, was determined
using market interest rates and discounted future cash flows. The fair values
of hedging instruments were obtained from dealer quotes and published foreign
currency exchange rates.
Hedging Transactions:
The Company has global operations and participates in the foreign exchange
markets to minimize its risk of loss from fluctuations in exchange rates. The
Company enters into forward exchange contracts to hedge certain of its foreign
currency commitments. Realized and unrealized gains and losses on these
contracts are recognized in the same period as the hedged commitments. The
Company's forward exchange contracts generally have maturities which do not
exceed twelve months in duration, and are designed to coincide with settlement
dates of the related transactions.
In March 1994, the Company settled its $54 million cross-currency interest rate
swap agreement and subsequently entered into a cross-currency interest rate
swap agreement and forward contract to continue to hedge a portion of its $150
million of net investments in its German subsidiaries. Under the swap, the
Company receives interest based on a floating U.S. dollar commercial paper rate
on $30 million and pays interest based on a floating Deutschemark (DM) LIBOR
rate on 50 million DM through March 1997, at which time the Company will
receive $30 million in exchange for paying 50 million DM. Under the terms of
the forward contract, the Company will pay 50 million DM in exchange for $30
million in March 1997.
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 $160 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% and pays
a floating rate, indexed to the level of the six-month DM LIBOR rate, on the
outstanding notional principal amounts in dollars and francs, respectively. The
initial notional principal amounts of $80 million and FRF 400 million 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.
Related foreign exchange gains and losses on the notional principal
values of these instruments are deferred in the cumulative translation
adjustments account (CTA) within shareholders' equity. The net pretax exchange
loss deferred in CTA of approximately $11 million at September 30, 1996 was
offset by translation gains and losses on the underlying net investments. Gains
and losses on the interest component of the swaps are included in interest
expense in the Consolidated Statement of Income on a current basis. The fair
value of these instruments approximate their carrying value at September 30,
1996 and 1995.
All contracts are executed with major international financial institutions and,
as such, the Company does not anticipate that these institutions will fail to
perform.
The following additional forward contracts, by which the Company sold or
purchased currencies, were outstanding at September 30, 1996:
<TABLE>
<CAPTION>
Currency Currency Contract
Sold Purchased Amount
(in millions)
<S> <C> <C>
British Pounds German DM $ 99
British Pounds U.S. Dollars 81
Canadian Dollars U.S. Dollars 54
Spanish Peseta German DM 34
German DM U.S. Dollars 18
French Franc German DM 16
Italian Lira U.S. Dollars 15
U.S. Dollars German DM 13
Others 85
----
$415
====
</TABLE>
The fair value of these forward contracts approximate their carrying value at
September 30, 1996 and 1995.
<PAGE> 17
Note 7 - Shareholders' Equity
<TABLE>
<CAPTION>
September 30,
(in millions of shares) 1996 1995
------------------
<S> <C> <C>
Preferred Stock, $1.00 par value
Authorized 2.0 2.0
Issued and outstanding Series D Convertible * *
------------------
Common Stock, $.16-2/3 par value
Authorized 300.0 300.0
Issued and outstanding 82.9 82.2
------------------
</TABLE>
* 302.0084 and 312.7224 shares of Series D Convertible Preferred Stock were
outstanding at September 30, 1996 and 1995, respectively.
In 1989 the Company issued 341.7969 shares of 7.75% Series D Convertible
Preferred Stock to its newly established ESOP for $175 million. The Preferred
Stock was issued in fractional amounts representing one ten-thousandth of a
share each or 3.4 million Preferred Stock units in total. Each Preferred Stock
unit has a liquidation value of $51.20.
The ESOP financed its purchase of the Preferred Stock units by issuing debt in
the amount of $175 million. The ESOP debt is guaranteed by the Company and is
therefore recorded as long-term debt of the Company. An amount representing
unearned employee compensation, equivalent in value to the unpaid balance of
the ESOP debt, has been recorded as a deduction from shareholders' equity. The
net increase in shareholders' equity at September 30, 1996 and 1995 resulting
from the above transactions was $25 million and $21 million, respectively.
Preferred Stock units are allocated to participating employees based on the
annual ESOP debt service payments and are held in trust for the employees until
their retirement, death, or vested termination. Each allocated unit may be
converted into two shares of common stock or redeemed for $51.20 in cash, at
the election of the employee or beneficiary, upon retirement, death or vested
termination. The Company, at its option, may issue shares of its common stock
or distribute cash to the ESOP to redeem the Preferred Stock units. As of
September 30, 1996, 6.0 million shares of common stock were reserved for the
conversion of the Preferred Stock units. Employees may vote allocated units,
and the plan trustee is to vote unallocated units in the same proportion as the
allocated units are voted.
Dividends on the Preferred Stock are deductible for income tax purposes and
enter into the determination of earnings available for common shareholders net
of their tax benefit.
The Company held 3.1 million shares of its common stock in treasury at
September 30, 1996. These shares may be used for a variety of purposes,
including employee benefit and stock option plans.
Options to purchase common stock of the Company, at prices equal to or higher
than market values on dates of grant, are granted to key employees under stock
option plans. Stock appreciation rights (SARs) may be granted in conjunction
with the stock option grants under one plan. Options or SARs are exercisable
between one and ten years after date of grant. Shares available for future
grant under stock option plans were 5.0 million at September 30, 1996.
<PAGE> 18
Following is a summary of activity in the stock option plans for 1996 and 1995:
<TABLE>
<CAPTION>
Weighted Shares
Average Subject to
Option Price Option SARs
--------------------------------------------
<S> <C> <C> <C>
Outstanding
September 30, 1994 $21.35 3,265,080 681,646
Granted 24.66 1,387,400 420,116
Exercised 16.91 836,110 154,236
Cancelled 22.86 661,086 155,920
-----------------------------------------
Outstanding
September 30, 1995 23.66 3,155,284 791,606
Granted 31.85 1,477,630 349,130
Exercised 21.40 452,656 82,224
Cancelled 26.14 206,184 7,988
-----------------------------------------
Outstanding,
September 30, 1996(1) 26.83 3,974,074 1,050,524
-----------------------------------------
Exercisable,
September 30, 1996 22.05 951,698 282,216
-----------------------------------------
</TABLE>
(1) Option exercise prices range from $16.56 to $31.84 per share.
Under the terms of a Rights Agreement, as amended effective November 16, 1994,
each share of the Company's common stock entitles its holder to one Right. The
Rights Agreement provides that if 20% or more of the Company's common stock is
acquired, the Rights become exercisable. Further, upon the occurrence of certain
defined events, the Rights entitle the holder to purchase common stock of the
Company or common stock of an "acquiring company" having a market value
equivalent to two times the Right's exercise price of $87.50. In addition, the
Rights Agreement permits the Company's Board of Directors, in certain
circumstances, to exchange the Rights for shares of common stock and permits a
bidder to call for a shareholders' vote to redeem the Rights. The Rights are
subject to redemption by the Board of Directors for $.005 per Right. The Rights
have no voting power and expire November 30, 2004.
Approximately $50 million of consolidated retained earnings at September 30,
1996 represents undistributed earnings of the Company's partially-owned
affiliates accounted for by the equity method.
<PAGE> 19
Note 8 - Retirement Plans
Pension Benefits:
The Company has noncontributory defined benefit pension plans covering
most domestic and certain foreign employees. The benefits provided are based
primarily on years of service and average compensation or a monthly retirement
benefit amount. Funding for domestic pension plans equals or exceeds the
minimum requirements of the Employee Retirement Income Security Act of 1974
(ERISA). Also, the Company makes contributions to union-trusteed pension funds
for construction and service personnel and to defined contribution plans for
the majority of Johnson Controls World Services Inc. employees. Net pension
expense for defined benefit plans included the following components:
<TABLE>
<CAPTION>
Year ended September 30,
(in millions) 1996 1995 1994
------------------------------
<S> <C> <C> <C>
Service cost $31.6 $28.0 $25.6
Interest cost on projected benefit obligation 51.7 46.5 41.7
Actual return on plan assets (105.9) (75.6) (16.7)
Net amortization and deferral 47.6 21.6 (33.6)
------------------------------
Net pension expense $25.0 $20.5 $17.0
==============================
</TABLE>
The following schedule details the funded status of the Company's
defined benefit pension plans. Plans with assets exceeding the accumulated
benefit obligation (ABO) are segregated by column from plans with the ABO
exceeding assets. The plans with the ABO exceeding assets were primarily
foreign plans which are not subject to ERISA. The projected benefit obligation
was determined using an assumed discount rate of 7.75% at September 30, 1996
and 1995. Pension expense was determined using assumed discount rates of 7.75%
in 1996, 8.0% in 1995 and 8.25% in 1994. The assumed long-term rate of return
on plan assets was 9.75% in 1996 and 1995, and 10% in 1994. The average rate of
compensation increase assumed was 6.0% in 1996, 1995 and 1994.
<TABLE>
<CAPTION>
September 30,
1996 1995
--------------------------------------
Assets ABO Assets ABO
Exceed Exceeds Exceed Exceeds
(in millions) ABO Assets ABO Assets
--------------------------------------
Actuarial present value
of benefit obligations
<S> <C> <C> <C> <C>
Vested $455.6 $87.0 $408.5 $97.0
Nonvested 28.1 3.8 26.7 4.7
--------------------------------------
Accumulated benefit obligation 483.7 90.8 435.2 101.7
Effect of projected salary increases 118.8 15.0 117.2 12.5
--------------------------------------
Total projected benefit obligation 602.5 105.8 552.4 114.2
Plan assets at fair value 664.0 40.7 546.6 49.1
--------------------------------------
(Deficit) excess of plan assets over
projected benefit obligation 61.5 (65.1) (5.8) (65.1)
Unrecognized transitional asset (22.9) (2.7) (27.2) (9.9)
Unrecognized net (gain) loss (11.3) 6.7 49.7 11.1
--------------------------------------
Prepaid (accrued) pension expense $27.3 ($61.1) $16.7 ($63.9)
=====================================
</TABLE>
<PAGE> 20
At the measurement dates of June 30, 1996 and 1995, plan assets included
approximately 824,000 and 804,000 shares, respectively, of Johnson Controls,
Inc. common stock with total market values of $28.7 million and $22.7 million
at the respective dates.
During 1989, the Company established an ESOP as part of its existing savings and
investment (401K) plan, which is available to eligible domestic employees. The
ESOP issued debt to finance its purchase of 3.4 million units (341.7969 shares)
of the Company's Series D Convertible Preferred Stock for $175 million. The
Preferred Stock units are being allocated to participating employees over the
15-year term of the ESOP debt and held in trust until the employees' retirement,
death, or vested termination. As of September 30, 1996, approximately 1,464,000
Preferred Stock units had been allocated to employees.
The Company's annual contributions to the ESOP, when combined with the Preferred
Stock dividends, are of an amount which will allow the ESOP to meet its debt
service requirements. This contribution amount was $8 million in 1996, $6
million in 1995, and $5 million in 1994. Total compensation expense recorded by
the Company was $17 million in 1996 and 1995 and $12 million in 1994.
Postretirement Health and Other Benefits:
The Company provides certain healthcare and life insurance benefits for eligible
retirees and their dependents. These benefits are not funded, but are paid as
incurred. Eligibility of coverage is based on meeting certain years of service
and retirement age qualifications. These benefits may be subject to deductibles,
copayment provisions and other limitations, and the Company has reserved the
right to modify these benefits. Effective January 31, 1994, the Company modified
certain salaried plans to place a limit on the Company's cost of future annual
retiree medical benefits at no more than 150% of the 1993 cost. Most
international employees are covered by government sponsored programs and the
cost to the Company is not significant.
Net postretirement benefit expense included the following components:
<TABLE>
<CAPTION>
Year ended September 30,
(in millions) 1996 1995 1994
--------------------------------
<S> <C> <C> <C>
Service cost $ 3.7 $ 4.3 $ 4.5
Interest cost on accumulated
benefit obligation 10.8 11.2 11.0
Net amortization and deferral (2.1) (1.9) (1.6)
--------------------------------
Net postretirement
benefit expense $12.4 $13.6 $13.9
================================
</TABLE>
The status of the Company's postretirement benefit plans is as
follows:
<TABLE>
<CAPTION>
September 30,
(in millions) 1996 1995
-------------------
<S> <C> <C>
Actuarial present value of accumulated
postretirement benefit obligation
Retirees $ 96.0 $ 84.5
Vested active plan participants 12.4 15.5
Other plan participants 41.1 44.5
-------------------
149.5 144.5
Unrecognized prior service cost 28.2 30.4
Unrecognized net gain 3.7 4.6
-------------------
Accrued postretirement benefit obligation $181.4 $179.5
===================
</TABLE>
The accumulated postretirement benefit obligation was determined using
an assumed discount rate of of 7.75% at September 30, 1996 and 1995. Assumed
discount rates of 7.75% in 1996, 8.0% in 1995 and 8.25% in 1994 were used to
determine postretirement benefit expenses. The September 30, 1996 accumulated
postretirement benefit obligation was determined using assumed healthcare cost
trend rates of 11% and 8% for pre-65 and post-65 years of age employees,
respectively. The September 30, 1995 accumulated postretirement benefit
obligation was determined using assumed healthcare cost trend rates of 12% and
9% for pre-65 and post-65 years of age employees, respectively. These rates
decrease 1% per year to an ultimate rate of 6%. The healthcare cost trend rate
assumption has a significant effect on the amounts reported. To illustrate, a
one percentage point increase in the asssumed healthcare cost trend rate would
have increased the accumulated benefit obligation by $9 million at September
30, 1996, and the sum of the service and interest costs in 1996 by $1 million.
No change in the Company's practice of funding these benefits on a pay-as-you-go
basis is anticipated.
<PAGE> 21
Note 9 - Research and Development
Expenditures for research activities relating to product development and
improvement are charged against income as incurred. Such expenditures amounted
to $156 million in 1996, $127 million in 1995 and $116 million in 1994.
<PAGE> 22
Note 10 - Income Taxes
Components of income from continuing operations before income taxes and
minority interests included the following:
<TABLE>
<CAPTION>
Year ended September 30,
(in millions) 1996 1995 1994
-----------------------------
<S> <C> <C> <C>
Domestic $353.7 $273.0 $226.7
Foreign 67.8 65.3 48.1
-----------------------------
Income before income taxes $421.5 $338.3 $274.8
=============================
</TABLE>
Components of the provision for income taxes for continuing operations were as
follows:
<TABLE>
<CAPTION>
Year ended September 30,
(in millions) 1996 1995 1994
-----------------------------
<S> <C> <C> <C>
Current
Federal $92.7 $98.7 $91.2
State 19.0 21.1 18.1
Foreign 25.8 21.5 19.9
-----------------------------
137.5 141.3 129.2
Deferred
Federal 27.3 (2.7) (14.2)
State 3.5 (0.8) (0.9)
Foreign 3.5 5.2 5.5
------------------------------
34.3 1.7 (9.6)
------------------------------
Provision for income taxes $171.8 $143.0 $119.6
==============================
</TABLE>
An analysis of effective income tax rates for continuing operations is shown
below:
<TABLE>
<CAPTION>
Year ended September 30,
(in millions) 1996 1995 1994
------------------------------
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes,
net of federal benefit 4.1 4.2 4.2
Foreign tax expense at
different rates and foreign
losses without tax benefit 1.3 1.1 3.2
Other 0.4 2.0 1.1
-----------------------------
40.8% 42.3% 43.5%
=============================
</TABLE>
The effective income tax rate for discontinued operations was 46% for 1996
and 40% for 1995 and 1994.
Deferred taxes for continuing operations were classified in the Consolidated
Statement of Financial Position as follows:
<TABLE>
<CAPTION>
September 30,
(in millions) 1996 1995
-----------------
<S> <C> <C>
Other current assets $61.1 $85.3
Other noncurrent assets 40.9 41.9
-----------------
Net deferred tax asset $102.0 $127.2
=================
</TABLE>
<PAGE> 23
Temporary differences and carryforwards which gave rise to deferred tax assets
and liabilities for continuing operations included:
<TABLE>
<CAPTION>
September 30,
(in millions) 1996 1995
--------------
<S> <C> <C>
Deferred tax assets
Accrued expenses and reserves $111.0 $123.2
Postretirement and postemployment benefits 79.3 78.1
Operating loss and foreign tax
credit carryforwards 63.5 66.2
Other 19.3 12.5
--------------
273.1 280.0
Valuation allowance (56.6) (30.9)
--------------
216.5 249.1
Deferred tax liabilities
Property, plant and equipment 50.8 47.2
Employee benefits 13.1 15.6
Inventories 5.9 5.8
Long-term contracts 29.7 18.7
Other 15.0 34.6
--------------
114.5 121.9
--------------
Net deferred tax asset $102.0 $127.2
==============
</TABLE>
The valuation allowance primarily represents foreign loss carryforwards and
foreign tax credit carryforwards for which utilization is uncertain. These tax
benefits expire at various dates from 1997 to 2003.
Income taxes paid during 1996, 1995 and 1994 were $116 million, $164 million
and $162 million, respectively.
Domestic income taxes have not been provided on undistributed earnings of
foreign subsidiaries of $233 million which are considered to be permanently
invested. If undistributed earnings were remitted, foreign tax credits would
substantially offset any resulting domestic tax liability.
<PAGE> 24
Note 11 - Contingencies
The Company is involved in a number of proceedings and potential proceedings
relating to environmental matters. At September 30, 1996, the Company had an
accrued liability of approximately $32 million relating to environmental
matters. The Company's environmental liabilities are undiscounted and do not
take into consideration any possible recoveries of future insurance proceeds.
Because of the uncertainties associated with environmental assessment and
remediation activities, the Company's future expenses to remediate the
currently identified sites could be considerably higher than the accrued
liability. Although it is difficult to estimate the liability of the Company
related to these environmental matters, the Company believes that these matters
will not have a materially adverse effect upon its capital expenditures,
earnings or competitive position.
Additionally, the Company is involved in a number of product liability and
various other suits incident to the operation of its businesses. Insurance
coverages are maintained and estimated costs are recorded for claims and suits
of this nature. It is management's opinion that none of these will have a
materially adverse effect on the Company's financial position, results of
operations or cash flows.
<PAGE> 25
Note 12 - Segment Information
The Company operates in two business segments, automotive and controls.
The automotive segment is primarily engaged in the design and manufacture of
complete seat systems, seating components and interior systems for cars, light
trucks and vans and the manufacture of automotive batteries for the replacement
and original equipment markets. The controls segment is primarily engaged in
the installation and service of control systems, the retrofit and service of
mechanical equipment and other systems in non-residential buildings, and for
on-site integrated facility management services.
All operating revenues and expenses are allocated to business segments
and geographical areas in determining their operating incomes. Other income
(expense), excluded from the determination of segment operating income,
includes interest income and expense, equity in earnings of partially-owned
affiliates, gains and losses from sales of long-term assets, foreign currency
gains and losses and other miscellaneous expenses. Unallocated assets are
corporate cash and cash equivalents, investments in partially-owned affiliates
and other non-operating assets.
The Company has sales to the automotive industry. Each of four major
automobile manufacturers accounted for between approximately 6% and 14% of the
Company's net sales in each of the years 1996, 1995 and 1994. As of September
30, 1996, the Company had accounts receivable totalling $385 million from these
manufacturers.
Product transfers from domestic to foreign locations amounted to $72 million in
1996, $48 million in 1995 and $56 million in 1994. Product transfers from
foreign to domestic locations were $71 million in 1996, $107 million in 1995
and $43 million in 1994. Interarea transfers of manufactured products are at
prices in excess of cost. The resultant income is assigned to the geographic
area of manufacture.
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------
BUSINESS SEGMENTS 1996 1995 1994
----------------------------
(in millions)
<S> <C> <C> <C>
Net Sales
Automotive $6,250.2 $4,770.4 $3,851.8
Controls 2,959.8 2,630.3 2,259.9
----------------------------
Consolidated $9,210.0 $7,400.7 $6,111.7
============================
Operating Income
Automotive $361.2 $291.1 $218.4
Controls 117.7 104.0 93.0
----------------------------
Consolidated $478.9 $395.1 $311.4
============================
Assets (Year End)
Automotive $3,044.2 $2,292.2 $1,906.9
Controls 1,180.1 1,073.1 929.1
Unallocated 326.2 315.7 415.2
----------------------------
4,550.5 3,681.0 3,251.2
Net assets of discontinued operations 440.7 466.6 382.5
----------------------------
Consolidated $4,991.2 $4,147.6 $3,633.7
============================
Depreciation/Amortization
Automotive $209.1 $172.2 $146.3
Controls 53.4 46.9 44.8
----------------------------
Consolidated $262.5 $219.1 $191.1
============================
Capital Expenditures
Automotive $260.6 $274.4 $233.0
Controls 61.7 56.5 28.7
----------------------------
Consolidated $322.3 $330.9 $261.7
============================
</TABLE>
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS Year ended September 30,
----------------------------
(in millions) 1996 1995 1994
----------------------------
<S> <C> <C> <C>
Net Sales
Domestic $5,967.0 $5,246.9 $4,717.1
European 2,709.0 1,667.1 990.9
Other foreign 534.0 486.7 403.7
----------------------------
Consolidated $9,210.0 $7,400.7 $6,111.7
============================
Operating Income
Domestic $409.0 $325.7 $269.3
European 49.7 31.4 4.1
Other foreign 20.9 39.3 37.6
Eliminations (0.7) (1.3) 0.4
----------------------------
Consolidated 478.9 396.1 311.4
Other income (expense) (57.4) (56.8) (36.6)
----------------------------
Income before income taxes
and minority interests $421.5 $338.3 $274.8
============================
Assets (Year End)
Domestic $2,345.2 $2,067.4 $1,875.5
European 1,550.1 1,081.5 791.4
Other foreign 329.0 216.4 169.1
Unallocated 326.2 315.7 415.2
----------------------------
4,550.5 3,681.0 3,251.2
Net assets of discontinued operations 440.7 466.6 382.5
Consolidated $4,991.2 $4,147.6 $3,633.7
============================
</TABLE>
<PAGE> 26
Note 13 - Subsequent events - acquisition and divestiture
Acquisition of Prince
The Company completed the acquisition of Prince Holding Corporation
(Prince) effective October 1, 1996, for a cash purchase price of approximately
$1.3 billion. Prince, based in Holland, Michigan, supplies automotive interior
systems and components including overhead systems and consoles, door panels,
floor consoles, visors and armrests.
The acquisition will be accounted for as a purchase. As such, the
excess of the purchase price over the estimated fair value of the acquired net
assets, which approximates $1.1 billion, will be recorded as goodwill.
The acquisition was initially financed with commercial paper. The
Company intends to use the after-tax proceeds from the sale of its Plastic
Container division (PCD) (see below) and debt securities with varying
maturities to finance the purchase.
The following unaudited pro forma results of operations of the Company
give effect to the acquisition of Prince, the divestiture of PCD and the
application of after-tax proceeds from the PCD sale, as though these
transactions had occurred on October 1, 1994.
<TABLE>
<CAPTION>
Year Ended September 30,
(in millions, except per share data; unaudited) 1996 1995
-------------------
<S> <C> <C>
Net sales $10,076.7 $8,102.2
Income from continuing operations $232.9 $155.6
Earnings per share from continuing operations
Primary $2.67 $1.78
Fully diluted $2.53 $1.68
Weighted average shares
Primary 83.6 82.3
Fully diluted 89.9 89.1
</TABLE>
The unaudited pro forma financial information presented is not
necessarily indicative of either the results of operations that would have
occurred had these transactions taken place on October 1, 1994 or the future
results of operations.
Divestiture of Plastic Container Division
On December 6, 1996, the Company and Schmalbach-Lubeca AG/Continental
Can Europe (a member of the VIAG Group) signed a definitive agreement under
which Schmalbach-Lubeca would purchase PCD. The transaction is expected to be
completed during the Company's 1997 second fiscal quarter. The Company intends
to use the after-tax proceeds from the sale to repay a portion of the
short-term debt which was used to finance the acquisition of Prince.
The results of PCD have been reported separately as discontinued
operations in the Consolidated Statement of Income. The results of the
discontinued operations do not reflect any interest expense or management fees
allocated by the Company. Prior year consolidated financial statements have
been restated to present PCD as a discontinued operation.
Revenues of PCD were $799 million in 1996, $930 million in 1995 and
$759 million in 1994. These amounts are not included in sales as reported in
the Consolidated Statement of Income.
The net assets of PCD consisted of the following:
<TABLE>
<CAPTION>
September, 30
(in millions) 1996 1995
---------------------
<S> <C> <C>
Cash and cash equivalents ($1.1) $23.3
Accounts receivable, net 87.5 107.2
Inventories 76.4 78.3
Other current assets 22.3 19.4
Property, plant & equipment, net 358.9 384.2
Goodwill, net 54.5 54.3
Other non-current assets (26.4) (26.8)
Accounts payable (94.7) (129.4)
Accrued expenses and other liabilities (36.7) (43.9)
---------------------
$440.7 $466.6
=====================
</TABLE>
<PAGE> 27
Note 14 - Subsequent event - stock split
On January 22, 1997, the Company's Board of Directors authorized a two-for-one
stock split to be distributed on March 31, 1997 to shareholders of record on
March 7, 1997. Shareholders' equity has been restated to give retroactive
recognition to the stock split by reclassifying from Capital in Excess of Par
Value to Common Stock the par value of the additional shares arising from the
split. In addition, all share and per share information in the financial
statements and notes thereto have been restated.
<PAGE> 28
JOHNSON CONTROLS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in millions)
================================================================================
<TABLE>
<CAPTION>
Year Ended September 30, 1996 1995 1994
---------------------------
<S> <C> <C> <C>
Accounts Receivable - Allowance for Doubtful Accounts
Balance at beginning of period $18.6 $19.9 $14.3
Provision charged to costs and expenses 6.8 4.5 8.8
Accounts charged off (4.7) (5.8) (3.3)
Acquisition of businesses 1.0 -- 0.7
Recoveries on accounts previously charged off (1.0) 0.2 (1.1)
Currency translation (0.1) 0.4 0.6
Other 0.3 (0.6) (0.1)
--------------------------
Balance at end of period $20.9 $18.6 $19.9
==========================
Deferred Tax Asset - Valuation Allowance
Balance at beginning of period $30.9 $23.8 $6.0
Allowance established for new
loss carryforwards and tax credits 30.6 8.5 18.0
Allowance reversed for loss
carryforwards utilized (4.9) (1.4) (0.2)
--------------------------
Balance at end of period $56.6 $30.9 $23.8
==========================
</TABLE>
<PAGE> 29
Johnson Controls, Inc.
Quarterly Financial Data
<TABLE>
<CAPTION>
First Second Third Fourth Full
Year ended September 30, Quarter Quarter Quarter Quarter Year
(in millions, except per share data; unaudited) ------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Net sales $1,997.0 $2,245.5 $2,482.0 $2,485.5 $9,210.0
Gross profit $303.2 $299.3 $349.5 $379.7 $1,331.7
Income from continuing operations $45.3 $36.3 $63.5 $77.6 $222.7
Discontinued operations, net of tax $1.7 $0.1 $5.8 $4.4 $12.0
Net income $47.0 $36.4 $69.3 $82.0 $234.7
Earnings per share from continuing operations
Primary $0.52 $0.40 $0.73 $0.90 $2.55
Fully diluted $0.49 $0.39 $0.69 $0.85 $2.42
Earnings per share
Primary $0.54 $0.40 $0.80 $0.95 $2.69
Fully diluted $0.51 $0.39 $0.76 $0.89 $2.55
1995
Net sales $1,664.6 $1,845.9 $1,927.1 $1,963.1 $7,400.7
Gross profit $254.2 $272.1 $294.8 $343.6 $1,164.7
Income from continuing operations $34.0 $29.6 $47.4 $57.0 $168.0
Discontinued operations, net of tax $7.2 $2.7 $7.9 $10.0 $27.8
Net income $41.2 $32.3 $55.3 $67.0 $195.8
Earnings per share from continuing operations
Primary $0.39 $0.33 $0.54 $0.67 $1.93
Fully diluted $0.37 $0.32 $0.51 $0.62 $1.82
Earnings per share
Primary $0.47 $0.37 $0.64 $0.78 $2.26
Fully diluted $0.45 $0.35 $0.60 $0.73 $2.13
</TABLE>
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS
DISCONTINUED OPERATIONS
On December 6, 1996, the Company and Schmalbach-Lubeca/AG Continental Can (a
member of the VIAG Group) signed a definitive agreement under which
Schmalbach-Lubeca would purchase the Plastic Container division (PCD) of the
Company. The transaction is expected to be completed during the Company's 1997
second fiscal quarter.
Operating results, net assets and cash flows of PCD have been segregated in the
accompanying consolidated financial statements. Net earnings of PCD were $12
million ($.13 per share on a fully diluted basis) in 1996, $28 million ($.31
per share on a fully diluted basis) in 1995 and $30 million ($.34 per share on
a fully diluted basis) in 1994 on sales of $799 million, $930 million and $759
million, respectively.
CONTINUING OPERATIONS
FISCAL 1996 COMPARED TO FISCAL 1995
SALES
Consolidated net sales for 1996 were $9,210 million, representing a 24%
increase over 1995 sales of $7,401 million. Automotive segment sales rose 31%
to $6,250 million in 1996, principally due to the Company's participation in
new and successful vehicle seating programs worldwide and the acquisition of
Roth Freres (Roth) during the year. New seating programs launched in 1996
included Ford's F-Series truck in North America and Fiesta in Europe. Some of
the more successful vehicle programs in which the Company participates include
Ford's Explorer, Chrysler's Jeep Cherokee and General Motors' Jimmy/Blazer. In
December 1995, the Company completed the acquisition of approximately 75% of
Roth, a major supplier of seating and interior components to the European
automotive industry, which added approximately $500 million to 1996 sales.
Sales of automotive batteries increased as a result of the higher level of unit
shipments to both replacement and original equipment customers. Increased
market penetration by aftermarket battery customers and the colder winter
weather were key contributors to the increase in replacement battery demand.
In addition, higher lead costs, which are passed through to customers in
pricing, increased sales.
Controls segment sales for 1996 were $2,960 million, 13% greater than 1995.
The increase was primarily generated by a higher level of activity in the
existing buildings market. Worldwide commercial integrated facilities
management sales improved substantially year-over-year. Sales of retrofit
control systems to the non-residential buildings market, primarily in the form
of performance contracts, also contributed to the increase. Construction sales
in Europe and the Pacific Rim were also higher
<PAGE> 31
than the year ago period. Facilities management activity in the U.S. government
market was lower than the prior year.
Assuming continued slow economic expansion in the U.S. and in Europe,
management projects consolidated net sales during 1997 to exceed 1996 levels.
Automotive segment sales are expected to increase approximately 25%-30%,
despite relatively stable vehicle production levels worldwide, due to the
acquisition of Prince Holding Corporation (Prince) effective October 1, 1996
(see Acquisition), a full year's impact of the Roth acquisition and the launch
of new seating business, both domestically and outside the U.S. The segment
will also benefit from higher battery shipments to new and existing customers,
including Western Auto.
Management expects an increase in controls segment sales of approximately
10%-15%. The anticipated driver of this increase is a higher level of activity
in the existing buildings market, primarily in the area of commercial
integrated facilities management and performance contracting. At September 30,
1996, the unearned backlog of commercial building systems, services, and
integrated facilities management contracts to be executed within the next
fiscal year was $1,168 million. The increase from the prior year amount of
$1,122 million is primarily due to growth in orders for integrated facilities
management and performance contracting business. The unearned backlog of
government facilities management contracts, which reflects only the
noncancellable portion of uncompleted contracts, was $424 million at September
30, 1996. This was 4% lower than the prior year as a result of scope
reductions on several U.S. government projects.
OPERATING INCOME
Consolidated operating income for 1996 was $479 million, an increase of 21%
over 1995. The automotive segment's operating income increased 24%, to $361
million, in 1996. The segment benefited from higher volumes in both North
America and Europe. Operating margin improvements in North America and Europe,
associated with established vehicle seating program efficiencies, were more
than offset by start-up costs in the segment's emerging South American and
Asia/Pacific seating markets. Significant reductions in battery operating costs
also benefited operating margins.
Operating income of the controls segment was $118 million, an increase of 13%
over the prior year. Income grew in line with the higher sales and primarily
resulted from the increased activity in the worldwide existing commercial
buildings market.
Consolidated operating income is expected to increase in 1997, with the
improvement derived primarily from the higher sales projections. The
automotive segment's operating income is anticipated to grow as a result of the
acquisition of Prince (see Acquisition), volume increases related to new
seating and battery
<PAGE> 32
business, and continued involvement in successful vehicle programs. Start-up
programs in South America and the Asia/Pacific region will continue to impact
operating income. The automotive segment has supply agreements with certain of
its customers that provide for annual productivity price reductions and, in
some instances, for the recovery of material and labor cost increases. The
segment has been, and anticipates it will continue to be, able to significantly
offset any sales price changes with cost reductions from design changes,
productivity improvements and similar programs with suppliers. The controls
segment will continue to benefit from the increasing activity in the existing
commercial buildings market, particularly in the integrated facilities
management and performance contracting markets.
OTHER INCOME/EXPENSE
Net interest expense (interest expense net of interest income) in 1996 was $66
million, $19 million higher than the prior year. The increase primarily
resulted from the financing associated with the Roth acquisition and the debt
assumed with the purchase. Net interest expense for 1997 is expected to
increase substantially as a result of the financing associated with the Prince
acquisition (see Acquisition).
Miscellaneous-net income of $8 million compares to an expense of $10 million in
the prior year. The Company recorded $14 million more in equity income in 1996
than in 1995. The majority of this improvement related to the Company's
Mexican affiliates which benefited from both improved operating results and the
absence of prior year losses associated with the Mexican Peso devaluation.
Other miscellaneous income items included gains associated with the sale of
certain assets and foreign currency transactions.
PROVISION FOR INCOME TAXES
The effective income tax rate on continuing operations for 1996 was 40.8%,
lower than the 1995 rate of 42.3%. The effective rate declined due to improved
performance by certain of the Company's consolidated subsidiaries and European
operations, offset by start-up operations in emerging markets. The effective
rate for the fiscal year remained higher than the combined federal and state
statutory rate of approximately 39%, principally due to overall higher foreign
effective rates. The effective rate for 1997 is expected to be approximately
42.5%, taking into account the non-deductible goodwill amortization associated
with the acquisition of Prince (see Acquisition).
MINORITY INTERESTS
Minority interests in net earnings of subsidiaries was level with the prior
year at $27 million.
<PAGE> 33
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations rose 33% in 1996 to $223 million as a result
of the improvements in operating and equity income, offset by the increase in
interest expense. Primary and fully diluted earnings per share from continuing
operations were $2.55 and $2.42, respectively, for 1996, up from $1.93 and
$1.82 in 1995.
FISCAL 1995 COMPARED TO FISCAL 1994
SALES
Consolidated net sales for 1995 were $7,401 million, a 21% increase from 1994.
A 24% increase in automotive segment sales to $4,770 million was primarily
generated by the Company's participation in new and successful vehicle seating
programs worldwide and continued strong North American vehicle production
levels. New vehicle programs launched in 1995 in which the Company participated
included Chrysler's Cirrus/Stratus sedans and Jeep Cherokee, General Motors'
Jimmy/Blazer and Toyota's Avalon. In January 1995 the Company acquired the
remaining interest in a domestic seating business which produces rear seats for
the Ford Explorer. The consolidation of this business also contributed to the
year-over-year increase. European seating sales increased substantially as a
result of the success of new business for customers including Ford, Rover and
Skoda, and favorable currency translation rates. Sales of batteries declined
due to the loss of the supply contract to Sears, Roebuck & Company, for which
final shipments were made in September 1994. Higher unit shipments to existing
customers, both in the aftermarket and to original equipment manufacturers, and
higher lead costs, which are passed through to customers in pricing, helped to
partially offset the decline.
Controls segment sales for 1995 were $2,630 million, 16% greater than in 1994.
This increase stemmed from a higher level of activity in the existing buildings
market. Strong growth within the worldwide integrated facilities management
market was largely due to the acquisition of Procord, a United Kingdom facility
management services provider, in September 1994. A contract to operate six
United Kingdom Atomic Energy Authority sites in March 1995, was also a major
contributor to the sales increase. Sales of retrofit control systems to the
non-residential buildings market, primarily in the form of performance
contracts, also contributed to the increase. Facility management activity in
the U.S. government market was lower year-over-year.
OPERATING INCOME
Consolidated operating income was $395 million for 1995, an increase of 27%
over 1994. The increase can be attributed to the strong improvement in
consolidated net sales. The automotive
<PAGE> 34
segment's operating income of $291 million was 33% higher than the prior year.
The segment benefited from higher volumes in both North America and Europe, and
successful cost containment initiatives which lowered manufacturing expense.
The European seating operations generated income during 1995 as compared with a
loss in the prior year, reflecting a number of new programs moving from the
start-up phase into production.
Operating income of the controls segment improved 12% to $104 million as a
result of the increased activity in the worldwide existing buildings market.
Income grew at a lesser rate than sales primarily due to the high level of
investments associated with supporting the rapid integrated facilities
management growth and the assimilation of acquisitions.
OTHER INCOME/EXPENSE
Net interest expense in 1995 was $47 million, $13 million higher than the prior
year. The increase resulted from the financing associated with acquisitions
and higher short-term interest rates.
Miscellaneous-net expense of $10 million was $8 million higher than the prior
year because of a decline in equity income. The lower equity income was
primarily due to the approximately $6 million impact of the devaluation of the
Mexican Peso on the Company's unconsolidated Mexican affiliates.
PROVISION FOR INCOME TAXES
The effective income tax rate on continuing operations for 1995 was 42.3%,
lower than the 1994 rate of 43.5%. The effective rate declined due to improved
performance by the Company's European operations. The effective rate for the
fiscal year remained higher than the combined federal and state statutory rate
of approximately 40%, due in part to overall higher foreign effective
rates.
MINORITY INTERESTS
Minority interests in net earnings of subsidiaries increased $7 million to $27
million in 1995. The increase relates to higher earnings from certain of the
Company's North American automotive seating consolidated subsidiaries.
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations rose 25% in 1995 to $168 million as a result
of the increase in operating income, offset by the increases in interest and
other miscellaneous-net expenses. Primary and fully diluted earnings per share
from continuing operations were $1.93 and $1.82, respectively, for 1995, up
from $1.53 and $1.46 in 1994.
<PAGE> 35
CAPITAL EXPENDITURES AND OTHER INVESTMENTS
Capital expenditures related to the continuing operations were $322 million,
$331 million and $262 million in 1996, 1995 and 1994, respectively.
Approximately eighty percent of the spending in 1996 was focused on the
automotive segment, and was related to the expansion of automotive seating
facilities and product lines worldwide, and cost reduction projects. Controls
segment spending primarily represented cost reduction projects. Capital
expenditures for 1997 are projected to approximate $375-$400 million. The
majority of the spending will again be focused on automotive seating and
interior expansion, with spending for the controls segment information
technology and cost reduction programs related to both segments making up the
remainder of the spending.
Goodwill increased $83 million to $548 million at September 30, 1996. The
increase is attributable to business acquisitions during 1996, most notably the
acquisition of Roth at the end of the Company's first fiscal quarter. All
acquisitions were accounted for as purchases, and as such, operating results
are included since the respective acquisition dates. Goodwill is expected to
increase significantly in 1997 in conjunction with the acquisition of Prince
(see Acquisition).
Investments in partially-owned affiliates of $128 million were approximately
$38 million higher than the prior year. Notable increases during 1996 included
the recording of the affiliate investment held by Roth and the initial
investment in a battery joint venture in China. The Company recorded
approximately $16 million of equity income for the year.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
Cash provided by operating activities of the continuing operations was $403
million during 1996 compared to $297 million in 1995. This increase was
generated by higher income as adjusted for depreciation and amortization of
intangibles. Total working capital (excluding "Net assets of discontinued
operations") increased to $226 million at September 30, 1996 compared to $81
million at September 30, 1995. This increase primarily reflects the impact of
the Roth purchase and the higher level of business activity.
CAPITALIZATION
The Company's capitalization of $2,541 million at September 30, 1996 included
short-term debt of $248 million, long-term debt, including the current portion,
of $785 million and shareholders' equity of $1,508 million. Total debt as a
percentage of total capitalization increased to 41% from 38% at September 30,
1995. In December 1995, the Company issued $125 million of 6.95%, 50-
<PAGE> 36
year debentures, the proceeds of which were used to finance the acquisition of
Roth. The Company expects total capitalization to increase substantially in
fiscal 1997 as a result of the Prince acquisition financing (see Acquisition).
In September 1996, the Company entered into two new revolving credit
facilities, one for $500 million maturing in May 2001 and one for $1.1 billion
maturing in September 1997. The credit facilities support the issuance of
commercial paper, including amounts issued for interim financing of the Prince
acquisition (see Acquisition). At September 30, 1996, $248 million of
short-term borrowings were outstanding compared to $130 million in 1995.
Additional unused credit facilities of approximately $423 million are available
to the Company's international subsidiaries.
A shelf registration statement is on file with the Securities and Exchange
Commission (SEC) under which the Company can issue a total of $350 million in
debt securities. Since the filing, $299 million of various debt securities have
been issued under the registration. On October 4, 1996, the Company filed a
universal shelf registration for $1.5 billion with the SEC. The registration,
currently under review by the SEC, covers issuance of a variety of debt and
equity instruments.
High credit ratings from Moody's (A2), Fitch (A) and Standard & Poor's (A -
credit watch) have been maintained on the Company's long-term debt.
The Company's capital resources and liquidity position are considered
sufficient to meet projected needs. Requirements for working capital, capital
expenditures, dividends and debt maturities in fiscal 1997 will continue to be
funded from operations, supplemented by short-term or long-term borrowings, if
required.
Because of its global operations, the Company participates in the foreign
exchange markets in order to minimize the Company's risk of loss from
fluctuations in exchange rates. The Company closely monitors its exposure to
fluctuations in currencies and, where cost-justified, adopts strategies to
reduce the impact of these fluctuations on the Company's financial performance.
These strategies include engaging in various hedging activities to manage
income and cash flows denominated in foreign currencies, and using foreign
currency borrowings when appropriate to finance investments outside the United
States.
ACQUISITION
The Company completed its acquisition of Prince effective October 1, 1996, for
a cash purchase price of approximately $1.3 billion. Prince, based in Holland,
Michigan, supplies automotive interior systems and components including
overhead systems and consoles, door panels, floor consoles, visors and
armrests. Prince had
<PAGE> 37
consolidated net sales of $867 million for the fiscal year ended September 30,
1996.
The acquisition will be accounted for as a purchase. As such, the excess of
the purchase price over the estimated fair value of the acquired net assets,
which approximates $1.1 billion, will be recorded as goodwill.
The acquisition was initially financed with commercial paper. The Company
intends to use the after-tax proceeds from the sale of PCD to repay a portion
of the commercial paper.
FUTURE ACCOUNTING CHANGES
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed of. The Statement is effective for the Company's
1997 fiscal year. The financial statement effect of adoption is currently
under review.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock Based
Compensation." This Statement requires either recognition of compensation
expense in the financial statements for those companies that adopt the fair
value based accounting method or expanded disclosure of pro forma net income
and earnings per share information for those companies that retain the current
accounting method set forth in Accounting Principles Board (APB) Opinion 25,
"Accounting for Stock Issued to Employees." The Company plans to retain the
current accounting method set forth in APB 25 and will begin expanded
disclosure in its fiscal 1997 financial statements.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company's U.S. operations are governed by federal environmental laws,
principally the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), the Clean Air
Act, and the Clean Water Act, as well as state counterparts ("Environmental
Laws"), and by federal and state laws addressing worker safety and health
("Worker Safety Laws"). These laws govern ongoing operations and the
remediation of sites associated with past operations. Under certain
circumstances these laws provide for civil and criminal penalties and fines, as
well as injunctive and remedial relief.
The Company's policy is to comply with applicable Environmental Laws and Worker
Safety Laws, and it has expended substantial resources, both financial and
managerial, to comply with such
<PAGE> 38
laws and for measures designed to protect the environment and maximize worker
protection and safety.
The Company believes it is in substantial compliance with such laws, and
maintains procedures designed to ensure compliance. However, the Company has
been, and in the future may become, the subject of formal or informal
enforcement actions or proceedings. Such matters typically are resolved by
negotiation with regulatory authorities resulting in commitments to compliance
or abatement programs and payment of penalties. Historically, neither such
commitments nor penalties imposed on the Company have been material.
Environmental Laws require that certain parties fund remedial actions
regardless of fault, legality of original disposal or ownership of the site.
The Company is currently participating in environmental assessment and
remediation at a number of sites under these laws, and it is likely that in the
future the Company will be involved in additional environmental assessments and
remediations. Such sites include facilities that had been engaged in the
recycling of lead batteries.
Future remediation expenses at these and other sites are subject to a number of
uncertainties, including the method and extent of remediation (dependent, in
part, on existing laws and technology), the percentage and type of material
attributable to the Company, the financial viability of site owners and the
other parties, and the availability of insurance coverage. A charge to earnings
is recorded for sites when it is probable that a liability has been incurred
and the cost can be reasonably estimated.
Environmental considerations are a part of all significant capital expenditure
decisions; however, expenditures in 1996 related solely to environmental
compliance were not material. Environmental remediation, compliance and
management expenses incurred by the Company in 1996 were approximately $18
million. At September 30, 1996, an accrued liability of approximately $32
million was maintained relating to environmental matters. The Company's
environmental liabilities are undiscounted and do not take into consideration
any possible recoveries of future insurance proceeds. Because of the
uncertainties associated with environmental assessment and remediation
activities, future expenses to remediate the currently identified sites could
be considerably higher than the accrued liability. However, while neither the
timing nor the amount of ultimate costs associated with known environmental
assessment and remediation matters can be determined at this time, the Company
does not expect that these matters will have a material adverse effect on its
financial position, results of operations or cash flows.
On June 30, 1995, the Company appealed to the Wisconsin Court of Appeals, the
Milwaukee County Circuit Court's order granting the summary judgement motion of
the Employers Insurance of Wausau and
<PAGE> 39
dismissing Johnson Controls' complaint seeking to recover environmental
response costs at 21 sites. The Circuit Court based its decision on the
reasoning of a 1994 Wisconsin Supreme Court case that held that under the law
of Wisconsin, response costs under CERCLA are not "damages" as that term is
used in comprehensive general liability policies. This appeal is still pending.
The Company has not recorded any anticipated recoveries of future insurance
proceeds, and therefore, the outcome of this case should have no significant
impact on the Company's consolidated financial statements.
If future Environmental and Worker Safety Laws contain more stringent
requirements than currently anticipated, expenditures may have a more
significant effect on the Company's financial position, results of operations
or cash flows. In general, the Company's competitors face the same laws, and,
accordingly, the Company should not be placed at a competitive disadvantage.
RISK FACTORS
Except for the historical information contained herein, certain matters
discussed in this "Management's Discussion and Analysis" are "forward looking
statements" as defined in the Private Securities Litigation Reform Act (PSLRA)
of 1995, which involve risks and uncertainties, and are subject to change based
on various important factors. The Company wishes to take advantage of the
"safe harbor" provisions of the PSLRA by cautioning that numerous important
factors as discussed in the Company's Form 8-K filing (dated September 27,
1996), among others, in some cases have affected, and in the future could
affect, the Company's actual results and could cause its actual consolidated
results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, the Company.
<PAGE> 40
Johnson Controls, Inc.
Five Year Summary
<TABLE>
<CAPTION>
Year ended September 30,
1996 (1,2) 1995 1994 1993 (3) 1992
-----------------------------------------------------------
<S> <C> <C> <C> <C>
(dollars in millions, except per share data)
Operating Results
Net sales $9,210.0 $7,400.7 $6,111.7 $5,496.6 $4,556.3
Operating income $478.9 $395.1 $311.4 $268.5 $233.4
Income from continuing operations before
cumulative effect of accounting changes $222.7 $168.0 $134.8 $113.6 $102.7
Net income $234.7 $195.8 $165.2 $15.9 $123.0
Earnings per share from continuing operations
before cumulative effect of accounting changes
Primary $2.55 $1.93 $1.53 $1.28 $1.18
Fully diluted $2.42 $1.82 $1.46 $1.21 $1.13
Earnings per share
Primary $2.69 $2.26 $1.90 $0.08 $1.43
Fully diluted $2.55 $2.13 $1.80 $0.08 (6) $1.36
Return on average
shareholders' equity (4) 17% 16% 15% 13%(5) 11%
Capital expenditures $322.3 $330.9 $261.7 $239.4 $175.8
Depreciation $226.6 $191.7 $169.3 $161.5 $136.9
Number of employees 65,800 59,200 54,800 50,100 46,800
Financial Position
Working capital (excluding "Net assets of
discontinued operations") $225.8 $81.1 $226.9 $213.8 $249.6
Total assets $4,991.2 $4,147.6 $3,633.9 $3,062.7 $3,014.4
Long-term debt $752.2 $619.3 $661.6 $487.7 $483.3
Total debt $1,033.5 $814.8 $702.3 $527.6 $650.6
Shareholders' equity $1,507.8 $1,340.2 $1,202.8 $1,079.0 $1,194.2
Total debt to total capitalization 41% 38% 37% 33% 35%
Book value per share $17.88 $16.05 $14.55 $13.15 $14.74
Common Share Information
Dividends per share $0.82 $0.78 $0.72 $0.68 $0.64
Market prices
High $38-1/4 $33 $30-5/8 $29-9/16 $10-7/8
Low $28-7/8 $22-7/8 $22-7/16 $19-5/16 $15-3/16
Number of shareholders 44,636 37,971 33,227 30,483 27,464
Weighted average shares (in millions)
Primary 83.6 82.3 82.1 81.5 80.2
Fully diluted 89.9 89.1 88.5 88.5 87.6
</TABLE>
(1) Share and per share information has been restated to give retroactive
effect to a two-for-one split of the Company's common stock effective March 7,
1997.
(2) Historical amounts have been restated to reflect the reclassification of
the Plastic Container division as a discontinued operation.
(3) Results include the adoption of Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," No. 109, "Accounting for Income Taxes," and No. 112,
"Employers' Accounting for Postemployment Benefits." The combined cumulative
effect of the accounting changes was a one-time charge of $122 million or $1.50
per share on a primary basis and $1.41 per share fully diluted, after taxes.
(4) The income amount used in the calculation is the Company's total net
income.
(5) The net income amount used in the calculation excludes the cumulative
effect of accounting changes; however, the cumulative effect has been reflected
in average equity computation.
(6) Calculation is anti-dilutive.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 and in the
Registration Statements on Form S-8 listed below of Johnson Controls, Inc. of
our report dated October 21, 1996, except as to Note 13 which is as of December
6, 1996 and Note 14 which is as of March 7, 1997, appearing in this Current
Report on Form 8-K.
1. Post-Effective Amendment No. 6 to Form S-16 on Form S-3
(Registration No. 2-64288)
2. Registration Statement on Form S-8 (Registration No. 33-30309)
3. Registration Statement on Form S-8 (Registration No. 33-31271)
4. Registration Statement on Form S-3 (Registration No. 33-50110)
5. Registration Statement on Form S-8 (Registration No. 33-58092)
6. Registration Statement on Form S-8 (Registration No. 33-58094)
7. Registration Statement on Form S-8 (Registration No. 33-49862)
8. Registration Statement on Form S-3 (Registration No. 33-57685)
9. Registration Statement on Form S-3 (Registration No. 33-64703)
10. Registration Statement on Form S-8 (Registration No. 333-10707)
11. Registration Statement on Form S-3 (Registration No. 333-13525)
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
March 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000053669
<NAME> JOHNSON CONTROLS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 165,200
<SECURITIES> 0
<RECEIVABLES> 1,609,900
<ALLOWANCES> 20,900
<INVENTORY> 344,700
<CURRENT-ASSETS> 2,849,100
<PP&E> 2,618,500
<DEPRECIATION> 1,298,300
<TOTAL-ASSETS> 4,991,200
<CURRENT-LIABILITIES> 2,182,600
<BONDS> 752,200
0
154,600
<COMMON> 14,400
<OTHER-SE> 1,338,800
<TOTAL-LIABILITY-AND-EQUITY> 4,991,200
<SALES> 9,210,000
<TOTAL-REVENUES> 9,210,000
<CGS> 7,878,300
<TOTAL-COSTS> 7,878,300
<OTHER-EXPENSES> 830,000
<LOSS-PROVISION> 6,800
<INTEREST-EXPENSE> 73,400
<INCOME-PRETAX> 421,500
<INCOME-TAX> 171,800
<INCOME-CONTINUING> 222,700
<DISCONTINUED> 12,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 234,700
<EPS-PRIMARY> 2.69<F1>
<EPS-DILUTED> 2.55<F1>
<FN>
<F1>A 2-for-1 split of the Company's common stock was effective on March 7, 1997.
Prior financial data schedules have not been restated to reflect this stock
split.
</FN>
</TABLE>
