<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 2: ACQUISITION OR DISPOSITION OF ASSETS
On February 28, 1997, Johnson Controls, Inc. (the Registrant)
completed the sale of its Plastic Container division (PCD) to
Schmalbach-Lubeca AG, a member of the VIAG Group. The sales price
was approximately $650 million, subject to certain adjustments.
The Registrant intends to use the after-tax proceeds from the sale
to partially reduce debt incurred from its October 1, 1996
acquisition of Prince Holding Corporation (Prince).
There are no material relationships between Schmalbach-Lubeca AG
and the Registrant or any of its affiliates, any director or
officer of the Registrant, or any associate of such director or
officer.
Item 7: FINANCIAL STATEMENTS AND EXHIBITS
In addition to the pro forma financial information required to be
filed in conjunction with the sale of PCD, the Registrant also
wishes to update the financial statements related to the Prince
acquisition (see Form 8-K dated October 4, 1996). The following is
included within this Form 8-K:
(a) Combined Financial Statements of Prince Holding
Corporation for the years ended September 30, 1996 and 1995
(attached as Attachment 1 hereto).
(b) Pro forma financial information required pursuant to
Article 11 of Regulation S-X (attached as Attachment 2
hereto).
(c) Exhibits:
(99) Press Release issued by the Registrant on March 4, 1997.
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment 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
ATTACHMENT 1
COMBINED FINANCIAL STATEMENTS
PRINCE HOLDING CORPORATION
Years ended September 30, 1996 and 1995
<PAGE> 4
Report of Independent Auditors
Board of Directors
Prince Holding Corporation
We have audited the accompanying combined balance sheets of Prince Holding
Corporation (principally comprised of the automotive interior components and
systems business of Prince Holding Corporation) as of September 30, 1996 and
1995, and the related combined statements of shareholders' equity, operations
and cash flows for the years then ended. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Prince Holding
Corporation at September 30, 1996 and 1995, and the combined results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Grand Rapids, Michigan
October 25, 1996
<PAGE> 5
Prince Holding Corporation
Combined Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30
1996 1995
---------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $6,360,837 $18,034,275
Trade accounts receivable, less
allowances of $2,613,000 in 1996
and $2,373,000 in 1995 101,640,908 107,611,099
Inventories (Note B):
Finished goods and work in process 14,558,254 15,494,297
Raw materials 11,189,059 11,411,687
---------------------------
25,747,313 26,905,984
Refundable income taxes 1,785,212
Deferred income taxes (Note E) 11,062,000 8,303,000
Other current assets 1,467,375 2,566,502
---------------------------
Total current assets 148,063,645 163,420,860
Property, plant and equipment:
Land 19,839,991 15,757,948
Buildings and improvements 111,935,184 76,046,968
Machinery and equipment 139,769,350 129,507,943
Construction in progress 4,009,182 22,760,624
---------------------------
275,553,707 244,073,483
Less accumulated depreciation 120,791,231 101,395,896
---------------------------
154,762,476 142,677,587
Other assets 3,225,070 863,721
---------------------------
Total assets $306,051,191 $306,962,168
===========================
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
SEPTEMBER 30
1996 1995
------------- -------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line-of-credit borrowings (Note C) $ 20,765,000
Trade accounts payable 67,076,340 $ 51,217,114
Salaries, wages and related withholdings 29,419,716 23,478,627
Deposits 8,435,370 944,978
Charitable contributions 482,689 7,002,243
Retirement plan contributions (Note D) 10,740,117 7,892,598
Distributions payable to shareholders 10,000,000
Export sales commissions (Note G) 7,967,947
Income taxes 15,011,288
Other accrued expenses 23,668,985 14,462,127
Current maturities of long-term debt 5,700,000 200,000
------------- -------------
Total current liabilities 166,288,217 138,176,922
Long-term debt, less current maturities (Note C) 34,330,000 70,994,000
Other noncurrent liabilities:
Deferred income taxes (Note E) 3,338,000 3,254,000
Other 1,209,676 972,841
------------- -------------
4,547,676 4,226,841
Shareholders' equity:
Preferred stock, $230 par value, nonvoting, 7%
cumulative--authorized 200,000 shares; issued and
outstanding 112,902 shares in 1996 and 122,962
shares in 1995 25,967,460 28,281,260
Common stock:
Class A, $0.33 par value, voting--authorized
720,000 shares; issued and outstanding 286,065
shares in 1996 and 319,830 shares in 1995 95,355 106,610
Class B, $0.33 par value, nonvoting--authorized
280,000 shares; issued and outstanding 108,328
shares in 1996 and 126,128 shares in 1995 36,109 42,043
Additional paid-in capital 4,197,333 4,197,333
Retained earnings 70,290,132 60,199,297
Accumulated translation adjustments 298,909 737,862
------------- -------------
Total shareholders' equity 100,885,298 93,564,405
------------- -------------
Total liabilities and shareholders' equity $306,051,191 $306,962,168
============= =============
</TABLE>
See accompanying notes to combined financial statements.
<PAGE> 7
Prince Holding Corporation
Combined Statements of Shareholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL ACCUMULATED TOTAL
PREFERRED ----------------- PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
STOCK CLASS A CLASS B CAPITAL EARNINGS ADJUSTMENTS EQUITY
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at beginning of year $32,425,170 $106,610 $42,043 $4,197,333 $30,100,426 $ 1,990 $ 66,873,572
Net earnings 46,043,517 46,043,517
Distributions to common shareholders (13,700,000) (13,700,000)
Cash dividends on preferred stock (2,244,646) (2,244,646)
Redemption of 18,017 shares of preferred stock (4,143,910) (4,143,910)
Equity adjustments from foreign currency 735,872 735,872
translation
-----------------------------------------------------------------------------------
Balances at September 30, 1995 28,281,260 106,610 42,043 4,197,333 60,199,297 737,862 93,564,405
Net earnings 30,318,996 30,318,996
Distributions to common shareholders (8,919,160) (8,919,160)
Cash dividends on preferred stock (1,943,303) (1,943,303)
Redemption of 33,765 shares of Class A common
stock and 17,800 shares of Class B common stock (11,255) (5,934) (14,732,466) (14,749,655)
Redemption of 10,060 shares of preferred stock (2,313,800) (2,313,800)
Net carrying value of assets transferred from
affiliated companies 5,366,768 5,366,768
Equity adjustments from foreign currency
translation (438,953) (438,953)
-----------------------------------------------------------------------------------
Balances at September 30, 1996 $25,967,460 $ 95,355 $36,109 $4,197,333 $70,290,132 $298,909 $100,885,298
===================================================================================
</TABLE>
( ) Denotes deduction.
See accompanying notes to combined financial statements.
<PAGE> 8
Prince Holding Corporation
Combined Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1996 1995
------------------------------
<S> <C> <C>
Net sales $866,690,417 $701,495,995
Cost of products sold 699,109,404 573,719,867
------------------------------
Gross margin 167,581,013 127,776,128
Selling, general and administrative expenses (Note G) 117,646,258 50,855,610
------------------------------
Operating income 49,934,755 76,920,518
Other expenses (income):
Interest expense 2,516,497 2,294,170
Foreign currency exchange loss (gain) (79,952) 2,004,669
Investment income (1,052,626) (750,579)
Miscellaneous (50,160) (250,259)
------------------------------
1,333,759 3,298,001
------------------------------
Earnings before income taxes 48,600,996 73,622,517
Income taxes (Note E) 18,282,000 27,579,000
------------------------------
Net earnings $ 30,318,996 $ 46,043,517
==============================
</TABLE>
See accompanying notes to combined financial statements.
<PAGE> 9
Prince Holding Corporation
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1996 1995
-----------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 30,318,996 $ 46,043,517
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 24,875,171 18,207,312
Deferred income tax credit (2,675,000) (2,505,000)
Changes in operating assets and liabilities:
Trade accounts receivable 5,770,967 (27,529,072)
Inventories 959,447 (7,057,073)
Other operating assets (1,565,385) 1,441,063
Trade accounts payable 15,859,226 (2,075,595)
Other operating liabilities (5,561,308) 18,957,679
-----------------------------
Net cash provided by operating activities 67,982,114 45,482,831
INVESTING ACTIVITIES
Additions to property, plant and equipment (31,333,568) (76,115,779)
Other 43,436 315,269
-----------------------------
Net cash used in investing activities (31,290,132) (75,800,510)
FINANCING ACTIVITIES
Distributions to common shareholders (18,919,160) (13,700,000)
Cash dividends on preferred stock (1,943,303) (2,244,646)
Proceeds from line-of-credit borrowings 15,286,000 34,074,000
Payments on line-of-credit borrowings and long-term debt (25,685,000) (5,370,000)
Redemption of common stock (14,749,655)
Redemption of preferred stock (2,313,800) (4,143,910)
-----------------------------
Net cash provided by (used in) financing activities (48,324,918) 8,615,444
Effect of foreign exchange rate changes (40,502) 388,499
-----------------------------
Decrease in cash and cash equivalents (11,673,438) (21,313,736)
Cash and cash equivalents at beginning of year 18,034,275 39,348,011
-----------------------------
Cash and cash equivalents at end of year $ 6,360,837 $ 18,034,275
=============================
</TABLE>
( ) Denotes use of cash and cash equivalents.
See accompanying notes to combined financial statements.
<PAGE> 10
Prince Holding Corporation
Notes to Combined Financial Statements
September 30, 1996 and 1995
NOTE A--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
On October 1, 1996, Johnson Controls, Inc. purchased all of the Class A and B
common stock of Prince Holding Corporation, and acquired its automotive
interior components and systems business and certain of its other assets and
liabilities (collectively "the Company" or "the Business") for a stated amount
of approximately $1,350,000,000, less assumed debt and other liability
adjustments.
In connection with the stock purchase, certain wholly owned subsidiaries of
Prince Holding Corporation were spun off to its present shareholders just prior
to the consummation of the purchase transaction and, therefore, such
subsidiaries have not been included in these combined financial statements.
The accompanying financial statements have been prepared to present the
combined historical financial position, results of operations and cash flows of
the Business purchased by Johnson Controls, Inc. as if the Business existed as
a stand-alone entity. Management believes that these combined financial
statements reasonably include all historical costs of the Business for the
years presented. All intercompany transactions have been eliminated. The
combined balance sheets do not reflect any adjustments to be made upon the
application of purchase accounting associated with the stock purchase
transaction.
REVENUE RECOGNITION
Revenue is recognized on the sale of products when the related items have been
shipped and legal title has passed to the customer.
CASH EQUIVALENTS
The Company considers money market accounts and all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
TRADE ACCOUNTS RECEIVABLE
The Company does not require collateral or other security on trade accounts
receivable.
<PAGE> 11
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE A--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INVENTORIES
Substantially all inventories are stated at the lower of last-in, first-out
cost or market (see Note B).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded on the basis of cost and include
expenditures for new facilities, major renewals and betterments. Normal repairs
and maintenance are expensed as incurred.
Depreciation of plant and equipment is computed using the straight-line method
over the estimated useful lives of the related assets.
TRADE ACCOUNTS PAYABLE
Trade accounts payable include $15,350,000 and $9,055,000 at September 30, 1996
and 1995, respectively, which relate to checks not yet presented for payment to
the bank.
INCOME TAXES
The provision for income taxes is based on earnings reported in these combined
financial statements and assumes that the Business files a separate income tax
return.
Deferred income tax assets and liabilities are determined by applying currently
enacted tax laws and rates to the cumulative temporary differences between the
carrying value of assets and liabilities for financial statement and income tax
purposes. Deferred income tax expense or credit is measured by the net change
in the deferred income tax asset and liability accounts during the year.
<PAGE> 12
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE A--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company's financial instruments consist of cash equivalents, trade accounts
receivable, trade accounts payable and debt. The carrying amounts of these
financial instruments approximate their fair value at September 30, 1996 and
1995. Fair value was determined using discounted cash flow analyses and current
interest rates for similar instruments. The Company does not hold or issue
financial instruments for trading purposes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported in the combined financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE B--INVENTORIES
If the first-in, first-out method of inventory valuation had been used,
inventories would have been $2,384,000 and $2,478,000 higher than reported at
September 30, 1996 and 1995, respectively.
NOTE C--DEBT
At September 30, 1996, the Company had line-of-credit agreements allowing it to
borrow, including the issuance of letters of credit, up to $125,000,000. The
agreements expired on October 15, 1996 and outstanding balances which bore
interest at an average rate of 5.65% were repaid.
<PAGE> 13
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE C--DEBT (CONTINUED)
Long-term debt consists of the following obligations:
<TABLE>
<CAPTION>
SEPTEMBER 30
1996 1995
------------------------
<S> <C> <C>
Term notes payable $40,000,000 $40,000,000
Unsecured line-of-credit borrowings 28,904,000
Mortgage notes payable 2,250,000
Other 30,000 40,000
------------------------
40,030,000 71,194,000
Less current maturities 5,700,000 200,000
------------------------
$34,330,000 $70,994,000
========================
</TABLE>
The term notes payable bear interest at 6.06% and require annual principal
payments totaling $5,700,000 beginning on December 20, 1996.
Principal maturities of long-term debt during the four years subsequent to 1997
are as follows: 1998--$5,730,000; 1999--$5,700,000; 2000--$5,700,000;
2001--$5,700,000.
Cash payments of interest on the Company's outstanding debt totaled $3,419,000
in 1996 and $3,429,000 in 1995. Interest of $902,000 in 1996 and $1,135,000 in
1995 was capitalized as a result of various construction projects.
NOTE D--RETIREMENT PLAN
The Company has a retirement plan which covers substantially all employees.
Contributions to the plan are at the discretion of the Board of Directors and
amounted to $10,000,000 in 1996 and $7,325,000 in 1995.
<PAGE> 14
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE E--INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1996 1995
-------------------------
<S> <C> <C>
Currently payable:
Federal $20,657,000 $26,979,000
State 300,000 3,105,000
Deferred credit (2,675,000) (2,505,000)
-------------------------
$18,282,000 $27,579,000
=========================
</TABLE>
A reconciliation of the Company's total income tax expense and the amount
computed by applying the statutory federal income tax rate of 35% to earnings
before income taxes is as follows:
<TABLE>
YEAR ENDED SEPTEMBER 30
1996 1995
-------------------------
<S> <C> <C>
Income taxes at statutory rate $17,010,000 $25,768,000
State income taxes, net of federal income tax reduction 195,000 390,000
Other 1,077,000 1,421,000
-------------------------
$18,282,000 $27,579,000
=========================
</TABLE>
<PAGE> 15
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE E--INCOME TAXES (CONTINUED)
Significant components of the Company's deferred income tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30
1996 1995
-------------------------
<S> <C> <C>
Deferred income tax assets:
Inventory and accounts receivable valuation
adjustments $2,988,000 $3,572,000
Accrued expenses not deductible until paid 8,452,000 4,338,000
Unrealized foreign currency exchange loss 719,000
Other 7,000 16,000
-------------------------
11,447,000 8,645,000
Deferred income tax liabilities:
Accelerated depreciation for income
tax purposes (3,043,000) (3,046,000)
Other (680,000) (550,000)
-------------------------
(3,723,000) (3,596,000)
-------------------------
Net deferred income tax assets $7,724,000 $5,049,000
=========================
</TABLE>
Undistributed earnings of the Company's foreign subsidiaries are not
significant and are considered to be indefinitely reinvested; accordingly, no
provision for federal income taxes has been provided.
Prince Holding Corporation made income tax payments of $39,500,000 in 1996 and
$24,600,000 in 1995.
NOTE F--LEASES
The Company leases certain buildings, machinery and computer equipment under
noncancelable operating leases. At September 30, 1996, minimum rental payments
due under these leases are as follows: 1997--$4,972,000; 1998--$3,129,000;
1999--$982,000; 2000--$510,000; 2001--$455,000.
Total rental expense under all operating leases was $5,443,000 in 1996 and
$6,219,000 in 1995.
<PAGE> 16
Prince Holding Corporation
Notes to Combined Financial Statements (continued)
NOTE G--RELATED PARTY TRANSACTIONS
The Company paid commissions of $13,142,000 in 1996 and $10,000,000 in 1995 to
Prince ESC, Inc., a domestic international sales corporation not combined in
these financial statements, for services associated with the sale of certain of
its export products.
Selling, general and administrative expenses include approximately $60,000,000
in 1996 for a one-time payment to employees of the Company in connection with
the purchase transaction described in Note A.
NOTE H--RESEARCH AND DEVELOPMENT EXPENSES
Expenses for research and development were $47,508,000 in 1996 and $36,806,000
in 1995. Research and development expenses include product conception and
ideation, design, development and engineering for new products, and significant
improvements to existing products.
NOTE I--INDUSTRY INFORMATION
The Company manufactures, sells and distributes interior components and systems
to the automotive industry. Export sales totaled $194,550,000 in 1996 and
$148,871,000 in 1995. Foreign assets and operations are not significant. Over
90% of the Company's sales are to various operating entities of General Motors
Corporation, Ford Motor Company and Chrysler Corporation.
<PAGE> 17
ATTACHMENT 2
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
<PAGE> 18
JOHNSON CONTROLS, INC. AND SUBSIDIARIES
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
The following combined condensed financial statements present, on a
pro forma basis, the effect of the February 28, 1997 sale by Johnson Controls,
Inc (JCI or the Company) of its Plastic Container division (PCD) to Schmalbach
Lubeca AG, a member of the VIAG Group.
They also present, on a pro forma basis, the effect of the acquisition
by JCI of Prince Holding Corporation (Prince) on October 1, 1996. The pro
forma data assume that the acquisition was accounted for as a purchase, and as
such, the assets acquired and liabilities assumed were recorded at their fair
values at the time of the acquisition. Studies, including appraisals of
properties and identifiable intangible assets and evaluations of underlying
business units by JCI's management, were made to determine the fair values of
the net assets acquired.
The Pro Forma Combined Condensed Financial Statements do not
necessarily reflect the operations of JCI and Prince as they would have been
had both transactions taken place at the beginning of the periods shown and the
operating results should not be deemed to be indicative of the future
operations of the combined companies.
The Pro Forma Combined Condensed Financial Statements should be read
in conjunction with the historical financial statements and notes thereto of
JCI and Prince.
<PAGE> 19
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
The following Pro Forma Combined Condensed Statements of Income reflect (i) the
impact of the sale of PCD on income from continuing operations of JCI and
combine income from continuing operations of JCI for the year ended September
30, 1996 with the results of operations of Prince for the year ended September
30, 1996 and (ii) the impact of the sale of PCD on income from continuing
operations of JCI for the three months ended December 31, 1996 had the
transactions been consummated on October 1, 1995 on the bases indicated in the
Notes to Pro Forma Combined Condensed Financial Statements.
<TABLE>
<CAPTION>
Year Ended September 30, 1996
-----------------------------------------------------------
Historical Pro Forma
--------------------------- -----------------------------
JCI Prince Adjustments Combined
---------- ------------ -------------- -----------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Net sales $9,210.0 $866.7 $10,076.7
Cost of sales 7,878.3 699.1 $4.8 (c) 8,588.9
6.7 (c)
-------- ------ ---- ---------
Gross profit 1,331.7 167.6 (11.5) 1,487.8
Selling, general and
administrative expenses 852.8 117.7 (13.1)(d) 924.7
(60.0)(d)
27.3 (c)
-------- ------ ---- ---------
Operating income 478.9 49.9 34.3 563.1
Interest income 7.9 1.1 9.0
Interest expense (73.4) (2.5) (47.6)(c) (123.5)
Miscellaneous-net 8.1 0.1 (1.9)(e) 6.3
-------- ------ ---- ---------
Other income (expense) (57.4) (1.3) (49.5) (108.2)
-------- ------ ---- ---------
Income from continuing operations
before income taxes and minority
interests 421.5 48.6 (15.2) 454.9
Provision for income taxes 171.8 18.3 (23.3)(c) 195.0
(0.7)(e)
28.9 (d)
Minority interests in net
earnings of subsidiaries 27.0 27.0
-------- ------ ---- ---------
Income from continuing operations $222.7 $30.3 ($20.1) $232.9
======== ====== ==== =========
Earnings per share from continuing
operations (f,g)
Primary $2.55 $2.67
======== =========
Fully diluted $2.42 $2.53
======== =========
Weighted Average Shares (f,g)
Primary 83.6 83.6
======== =========
Fully diluted 89.9 89.9
======== =========
</TABLE>
<PAGE> 20
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Continued)
<TABLE>
<CAPTION>
Three Months Ended December 31, 1996
-----------------------------------------
Historical Pro Forma
---------- ------------------------
JCI Adjustments Combined
---------- ----------- --------
(in millions, except per share data)
<S> <C> <C> <C>
Net sales $2,761.3 $2,761.3
Cost of sales 2,354.6 2,354.6
-------- ---- --------
Gross profit 406.7 406.7
Selling, general and
administrative expenses 276.8 276.8
-------- ---- --------
Operating income 129.9 129.9
Interest income 2.0 2.0
Interest expense (32.5) $6.3 (c) (26.2)
Miscellaneous-net 5.6 5.6
-------- ---- --------
Other income (expense) (24.9) 6.3 (18.6)
-------- ---- --------
Income from continuing operations
before income taxes and minority
interests 105.0 6.3 111.3
Provision for income taxes 44.6 2.7 (c) 47.3
Minority interests in net
earnings of subsidiaries 5.5 5.5
-------- ---- --------
Income from continuing operations $54.9 $3.6 $58.5
======== ==== ========
Earnings per share from continuing
operations (f,g)
Primary $0.63 $0.67
======== ========
Fully diluted $0.59 $0.63
======== ========
Weighted Average Shares (f,g)
Primary 83.8 83.8
======== ========
Fully diluted 90.2 90.2
======== ========
</TABLE>
<PAGE> 21
PRO FORMA COMBINED CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
The following Pro Forma Combined Condensed Statement of Financial Position
reflects the financial position of JCI at December 31, 1996, on the assumption
that the sale of PCD had been consummated on December 31, 1996 on the bases
indicated in the Notes to Pro Forma Combined Condensed Financial Statements.
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------
Historical Pro Forma
---------- -------------------------
JCI Adjustments Combined
---------- ----------- --------
(in millions)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 139.4 $ 500.0 (a) $ 139.4
(500.0)(a)
Accounts receivable - net 1,808.9 1,808.9
Inventories 381.2 381.2
Net assets of discontinued operations 449.8 (449.8)(a) 0.0
Other current assets 306.3 306.3
-------- ------- --------
Current assets 3,085.6 (449.8) 2,635.8
Property, plant and equipment-net 1,519.5 1,519.5
Goodwill-net 1,626.8 1,626.8
Investments in partially-owned
affiliates 132.9 132.9
Other noncurrent assets 249.7 249.7
-------- ------- --------
Total assets $6,614.5 ($449.8) $6,164.7
======== ======= ========
LIABILITIES AND EQUITY
Short-term debt $1,499.8 ($500.0)(a) $ 699.8
(300.0)(a)
Current portion of long-term debt 94.0 94.0
Accounts payable 1,225.3 1,225.3
Accrued compensation and benefits 266.5 266.5
Accrued income taxes 60.0 60.0
Billings in excess of costs and
earnings on uncompleted contracts 117.9 117.9
Other current liabilities 439.5 439.5
-------- ------- --------
Current liabilities 3,703.0 (800.0) 2,903.0
Long-term debt 718.6 300.0 (a) 1,018.6
Postretirement health and other
benefits 167.0 167.0
Other noncurrent liabilities 470.8 470.8
Shareholders' equity 1,555.1 50.2 (a) 1,605.3
-------- ------- --------
Total liabilities and equity $6,614.5 ($449.8) $6,164.7
======== ======= ========
</TABLE>
<PAGE> 22
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(a) On February 28, 1997, the Company completed the sale of its Plastic
Container division (PCD) to Schmalbach-Lubeca AG, a member of the VIAG
Group. The pro forma data assume the sale will generate after-tax
proceeds of approximately $500 million. This amount is an estimate
based upon the stated sales price and expected taxes to be paid. The
actual amount will not be known until the book and tax bases of PCD
and certain possible adjustments have been finalized.
The Company intends to use these proceeds to reduce the short-term
debt which was incurred to finance the Prince acquisition (see note
b). Of the remaining debt, $300 million is expected to be financed
long-term, with varying maturities and a weighted average interest
rate of 7.0%. The $462 million in remaining short-term debt is
estimated to carry a 5.75% interest rate.
An anticipated gain on the sale will be reflected in the Company's
1997 second fiscal quarter results. The amount shown as the
Shareholders' equity adjustment reflects the estimated after-tax
proceeds less the amount of Net assets of discontinued operations at
December 31, 1996. This amount is not necessarily indicative of the
actual gain to be recorded as certain deferred sales price amounts and
the book and tax bases of PCD have not been finalized.
(b) The Pro Forma Combined Condensed Financial Statements reflect the
October 1, 1996 purchase by JCI of Prince stock at a stated cost of
$1,350 million, less certain assumed debt and other liability
adjustments of approximately $93 million, plus acquisition expenses of
approximately $5 million, for a total purchase price of $1,262
million.
<PAGE> 23
(c) The following adjustments have been made in preparing the Pro Forma
Combined Condensed Statements of Income to reflect, on a pro forma
basis, the estimated expense adjustments and related income tax
effects associated with the use of PCD proceeds for acquisition
financing (see note a) and the fair value adjustments to Prince's
assets and liabilities:
<TABLE>
<CAPTION>
Three Months
Year Ended Ended
September 30, December 31,
1996 1996
------------- ------------
(in millions)
<S> <C> <C>
Net change in interest expense to reflect
short-term and long-term borrowings
(at interest rates of 5.75% and 7.0%
for short-term and long-term debt,
respectively) and use of proceeds $ 47.6 ($6.3)
Change in depreciation expense to
reflect fair value adjustment 4.8 -
Amortization of fair value
adjustment to identifiable
intangible assets 6.7 -
Tax effect and amortization of
deferred taxes relating to the
above adjustments (23.3) 2.7
Amortization of goodwill 27.3
-------
-
-------
$ 63.1 ($3.6)
======= =======
</TABLE>
A 1/8% variance in interest rates would cause interest expense to
increase/decrease by $.9 million for the year ended September 30, 1996
and $.2 million for the three months ended December 31, 1996. The
interest rates assumed in the pro forma calculations represent the
estimated borrowing rates available to JCI.
<PAGE> 24
(d) The following adjustments have been made in preparing the Pro Forma
Combined Condensed Statement of Income to reflect, on a pro forma
basis, the elimination of certain nonrecurring expenses from the
Prince Statement of Income.
<TABLE>
<CAPTION>
Year Ended
September 30,
1996
-------------------
(in millions)
<S> <C>
To adjust for export sales commissions
paid to Prince's domestic international
sales corporation $ 13.1
To adjust for nonrecurring acquisition-
related expenses incurred by Prince
prior to the acquisition 60.0
Tax effect related to the above
adjustments (28.9)
-------
$ 44.2
======
</TABLE>
(e) The Prince preferred stock of $26 million at September 30, 1996 is
held by its original shareholders and, as such, this amount is
included in Other noncurrent liabilities in the December 31, 1996
Statement of Financial Position. Dividends on the Preferred Stock of
$1.9 million (less the related tax effect of $0.7 million) for the
year ended September 30, 1996 have been reflected as an expense in the
Pro Forma Combined Condensed Statement of Income.
<PAGE> 25
(f) 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 for the year ended September 30, 1996 and $1.3
million for the three months ended December 31, 1996. 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.
(g) Number of shares and per share amounts have been restated to reflect a
two-for-one split of the Company's common stock payable on March 31,
1997 to shareholders of record as of March 7, 1997.
<PAGE> 1
<PAGE 1> EXHIBIT-99
[JOHNSON CONTROLS LOGO] NEWS RELEASE
- --------------------------------------------------------------------------------
Johnson Controls, Inc., with headquarters in Milwaukee, Wisconsin, is a global
market leader in automotive systems and controls. Through its Automotive
Systems Group, it supplies seating systems, interior systems and batteries to
the automotive original equipment and replacement markets. The Controls Group
serves the nonresidential buildings market with control systems and services,
and integrated facility management. Founded in 1885, it operates in more than
500 locations worldwide. Johnson Controls securities (JCI) are listed on the
NYSE.
- --------------------------------------------------------------------------------
CONTACT: Glen L. Ponczak For Immediate Release
414-228-2375 March 4, 1997
JOHNSON CONTROLS COMPLETES SALE OF ITS PLASTIC CONTAINER DIVISION
MILWAUKEE, WISCONSIN, March 4, 1997 ... Johnson Controls, Inc., today
announced it has completed the previously announced sale of its Plastic
Container Division (PCD) to Schmalbach-Lubeca AG, a member of the VIAG Group.
Johnson Controls said that the sales price was approximately US$650
million, subject to certain adjustments. The company will use the after-tax
proceeds, estimated at $475-525 million, to partially reduce debt incurred from
its $1.35 billion acquisition of Prince, an automotive interiors supplier,
which was completed in October 1996.
The company's financial results for the quarter ended March 31, 1997,
will reflect an after-tax gain on the sale. The gain will be classified as
part of discontinued operations.
The company said it expects to file reclassified financial statements
reflecting the PCD on a discontinued operations basis with the Securities and
Exchange Commission within the next ten days.
PCD manufacturers PET (polyethylene terephthalate) beverage and food
bottles in North America, Europe and South America.
####
