<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- -------------
Commission File Number 1-5097
JOHNSON CONTROLS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-0380010
(State of Incorporation) (I.R.S. Employer
Identification No.)
5757 North Green Bay Avenue, P.O. Box 591, Milwaukee, WI 53201
(Address of principal executive office)
Registrant's telephone number, including area code: (414) 228-1200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 31, 1997
----- --------------------------------
Common Stock $.16 2/3 Par Value 84,168,986
<PAGE> 2
JOHNSON CONTROLS, INC.
FORM 10-Q
December 31, 1997
REPORT INDEX
Page No.
PART I - FINANCIAL INFORMATION:
Consolidated Statement of Financial Position
at December 31, 1997, September 30, 1997 and
December 31, 1996 ............................................. 3
Consolidated Statement of Income for the Three-Month
Periods Ended December 31, 1997 and 1996 ...................... 4
Consolidated Statement of Cash Flows for the Three-
Month Periods Ended December 31, 1997 and 1996 ............... 5
Notes to Consolidated Financial Statements ..................... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 9
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings .................................... 13
Item 4. Results of Votes of Security Holders ................. 13
Item 5. Other Information .................................... 14
Item 6. Exhibits and Reports on Form 8-K ..................... 14
SIGNATURES ................................................... 15
2
<PAGE> 3
JOHNSON CONTROLS, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In millions)
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1997 1997 1996
------------ ------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 248.1 $ 111.8 $ 139.4
Accounts receivable - net 1,644.6 1,467.4 1,586.0
Costs and earnings in excess of billings on
uncompleted contracts 199.1 217.2 222.9
Inventories 390.0 373.4 381.2
Net assets of discontinued operations - - 449.8
Other current assets 402.1 359.5 306.3
-------- -------- --------
Current assets 2,883.9 2,529.3 3,085.6
Property, plant and equipment - net 1,548.1 1,533.0 1,519.5
Goodwill - net 1,558.0 1,560.3 1,626.8
Investments in partially-owned affiliates 155.8 144.6 132.9
Other noncurrent assets 262.7 281.4 249.7
-------- -------- --------
Total assets $6,408.5 $6,048.6 $6,614.5
======== ======== ========
LIABILITIES AND EQUITY
Short-term debt $ 614.5 $ 537.8 $1,499.8
Current portion of long-term debt 58.3 118.4 94.0
Accounts payable 1,428.1 1,341.9 1,225.3
Accrued compensation and benefits 282.4 303.3 266.5
Accrued income taxes 86.2 78.8 60.0
Billings in excess of costs and earnings
on uncompleted contracts 130.8 107.6 100.0
Other current liabilities 515.7 484.9 457.4
-------- -------- --------
Current liabilities 3,116.0 2,972.7 3,703.0
Long-term debt 964.8 806.4 718.6
Postretirement health and other benefits 167.5 167.2 167.0
Other noncurrent liabilities 412.0 414.4 470.8
Shareholders' equity 1,748.2 1,687.9 1,555.1
-------- -------- --------
Total liabilities and equity $6,408.5 $6,048.6 $6,614.5
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
JOHNSON CONTROLS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share data; unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended December 31,
---------------------------
1997 1996
-------- --------
<S> <C> <C>
Net sales $3,056.3 $2,761.3
Cost of sales 2,622.1 2,354.6
-------- --------
Gross profit 434.2 406.7
Selling, general and administrative expenses 285.8 276.8
-------- --------
Operating income 148.4 129.9
Interest income 2.3 2.0
Interest expense (30.1) (32.5)
Miscellaneous - net 1.7 5.6
-------- --------
Other income (expense) (26.1) (24.9)
-------- --------
Income before income taxes and minority interests 122.3 105.0
Provision for income taxes 50.8 44.6
Minority interests in net earnings of subsidiaries 6.2 5.5
-------- --------
Income from continuing operations 65.3 54.9
Discontinued operations
Loss from discontinued operations, adjusted for
income tax benefit of $1.6 and minority interests - (1.8)
-------- --------
Net income $ 65.3 $ 53.1
======== ========
Earnings available for common shareholders $ 63.0 $ 50.8
======== ========
Earnings per share from continuing operations
Basic $ 0.75 $ 0.64
======== ========
Diluted $ 0.70 $ 0.59
======== ========
Earnings per share
Basic $ 0.75 $ 0.62
======== ========
Diluted $ 0.70 $ 0.57
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
JOHNSON CONTROLS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions; unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended December 31,
-------------------------
1997 1996
------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations $ 65.3 $ 54.9
Adjustments to reconcile income from continuing operations to
cash provided by operating activities of continuing operations
Depreciation 76.0 69.3
Amortization of intangibles 16.9 17.5
Equity in earnings of partially-owned affiliates (5.9) (8.2)
Deferred income taxes (0.2) 0.4
Other (0.3) 9.2
Changes in working capital, excluding acquisition of businesses
Receivables (149.5) (114.7)
Inventories (13.4) (24.5)
Other current assets (40.5) 11.9
Accounts payable and accrued liabilities 80.1 (66.2)
Accrued income taxes 6.9 15.2
Billings in excess of costs and earnings on uncompleted contracts 23.5 16.3
------- ---------
Cash provided (used) by operating activities of continuing operations 58.9 (18.9)
Cash used by operating activities of discontinued operations - (6.0)
------- ---------
Cash provided (used) by operating activities 58.9 (24.9)
------- ---------
INVESTING ACTIVITIES
Capital expenditures (86.0) (63.0)
Sale of property, plant and equipment - net 0.4 0.8
Acquisition of businesses, net of cash acquired - (1,149.1)
Additions of long-term investments (1.5) (6.8)
Investing activities of discontinued operations - (8.1)
------- ---------
Cash used by investing activities (87.1) (1,226.2)
------- ---------
FINANCING ACTIVITIES
Increase in short-term debt 239.8 1,249.5
Issuance of long-term debt 5.9 1.9
Repayment of long-term debt (60.8) (12.2)
Payment of cash dividends (22.1) (20.9)
Net financing activities of discontinued operations - (2.8)
Other 1.7 9.8
------- ---------
Cash provided by financing activities 164.5 1,225.3
------- ---------
Increase (decrease) in cash and cash equivalents $ 136.3 ($25.8)
======= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
JOHNSON CONTROLS, INC.
Form 10-Q, December 31, 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Financial Statements
--------------------
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position,
results of operations, and cash flows for the periods presented. These
financial statements should be read in conjunction with the audited
financial statements and notes thereto contained in the Company's Annual
Report to Shareholders for the year ended September 30, 1997. The results
of operations for the three months ended December 31, 1997 are not
necessarily indicative of the results which may be expected for the
Company's 1998 fiscal year because of seasonal and other factors.
2. Cash Flow
---------
For purposes of the Consolidated Statement of Cash Flows, the Company
considers all investments with a maturity of three months or less at the
time of purchase to be cash equivalents.
Income taxes paid during the three months ended December 31, 1997 and 1996
(net of income tax refunds) totaled approximately $32 million and $26
million, respectively. Total interest paid on both short- and long-term
debt was $35 million and $42 million for the three months ended December
31, 1997 and 1996, respectively.
3. Inventories
-----------
Inventories are valued at the lower of cost or market. Cost is determined
using the last-in, first-out (LIFO) method for most inventories at domestic
locations. The cost of other inventories is determined on the first-in,
first-out (FIFO) method.
<TABLE>
<CAPTION>
Inventories were comprised of the following:
December 31,
(in millions) 1997 1996
------- -------
<S> <C> <C>
Raw materials and supplies $183.4 $174.9
Work-in-process 95.2 93.8
Finished goods 150.0 153.8
------ ------
FIFO inventories 428.6 422.5
LIFO reserve (38.6) (41.3)
------ ------
LIFO inventories $390.0 $381.2
====== ======
</TABLE>
6
<PAGE> 7
JOHNSON CONTROLS, INC.
Form 10-Q, December 31, 1997
4. Income Taxes
------------
The provision for income taxes is determined by applying an estimated
annual effective income tax rate to income before income taxes. The
estimated annual effective income tax rate is based on the most recent
annualized forecast of pretax income, permanent book/tax differences, and
tax credits. It also includes the effect of any valuation allowance
expected to be necessary at the end of the year.
5. Earnings Per Share
------------------
Effective October 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share," which establishes
revised standards for computing and presenting earnings per share. Prior
period earnings per share have been restated. The following reconciles the
numerators and denominators used to calculate basic and diluted earnings
per share from continuing operations for the three month periods ended
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
For the Three Months Ended
December 31, 1997
-------------------------------------
(in millions, except per share data) Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Income from continuing operations $65.3
Less: Preferred stock dividends, net of tax benefit (2.3)
--------
BASIC EARNINGS PER SHARE
Income available to common stockholders $63.0 84.1 $0.75
======== ==== =====
EFFECT OF DILUTIVE SECURITIES
Stock options 1.5
Convertible preferred stock 2.3 5.6
Less: Compensation expense, net of tax, arising
from assumed conversion of preferred stock (1.3)
-------- ----
DILUTED EARNINGS PER SHARE
Income available to common stockholders
plus assumed conversions $64.0 91.2 $0.70
======== ==== =====
<CAPTION>
For the Three Months Ended
December 31, 1996
---------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Income from continuing operations $54.9
Less: Preferred stock dividends, net of tax benefit (2.3)
---------
BASIC EARNINGS PER SHARE
Income available to common stockholders $52.6 82.8 $0.64
========= ==== =====
EFFECT OF DILUTIVE SECURITIES
Stock options 1.3
Convertible preferred stock 2.3 6.0
Less: Compensation expense, net of tax, arising
from assumed conversion of preferred stock (1.3)
--------- ----
DILUTED EARNINGS PER SHARE
Income available to common stockholders
plus assumed conversions $53.6 90.1 $0.59
========= ==== =====
</TABLE>
7
<PAGE> 8
JOHNSON CONTROLS, INC.
Form 10-Q, December 31, 1997
6. Issuance of Long-Term Debt
--------------------------
On February 3, 1998, the Company issued $175 million of 6.3% notes due in
2008 to refinance a portion of its commercial paper borrowings.
Accordingly, at December 31, 1997, $175 million of short-term debt was
classified as long-term debt.
7. Acquisition and Divestiture of Businesses
-----------------------------------------
Effective October 1, 1996, the Company completed the acquisition of Prince
Holding Corporation (Prince) for approximately $1.3 billion. Prince, based
in Holland, Michigan, supplies automotive interior systems and components
including overhead systems and consoles, door panels and floor consoles.
The acquisition was accounted for as a purchase. The excess of the
purchase price over the fair value of the acquired net assets, which
approximated $1.1 billion, was recorded as goodwill. The Company used the
after-tax proceeds from the sale of its Plastic Container division (PCD)
and debt securities to finance the purchase.
On February 28, 1997, the Company completed the sale of PCD to
Schmalbach-Lubeca AG/Continental Can Europe (a member of the VIAG Group).
Accordingly, prior year consolidated financial statements reflect PCD as a
discontinued operation. The results of discontinued operations do not
reflect any interest expense or management fees allocated by the Company.
Revenues of PCD were $142 million for the three months ended December 31,
1996 and are not included in sales as reported in the Consolidated
Statement of Income. The loss per basic and diluted share from
discontinued operations was $0.02 for the three months ended December 31,
1996.
8. Restructuring Charge
--------------------
In the second quarter of fiscal 1997, the Company recorded a restructuring
charge, including related asset writedowns, of $70.0 million ($40.3 million
or $0.48 per basic share and $0.44 per diluted share, after-tax) involving
the Company's automotive and controls segments. At September 30, 1997, the
remaining reserve totaled $14.8 million, consisting of employee severance
and termination benefits of $5.1 million and $9.7 million of other costs
associated with the restructuring initiatives. During the first quarter of
fiscal 1998, costs of $3.6 million related primarily to employee severance
and termination benefits associated with restructuring actions in the
automotive segment were charged against the reserve. As part of these
actions, approximately 150 employees separated from the Company. It is
expected that the restructuring initiatives will be substantially completed
by mid-year of fiscal 1998.
9. Stock Split
-----------
Prior year share and per share information have been restated to reflect a
two-for-one split of the Company's common stock paid on March 31, 1997 to
shareholders of record on March 7, 1997.
8
<PAGE> 9
JOHNSON CONTROLS, INC.
Form 10-Q, December 31, 1997
10. Contingencies
-------------
The Company is involved in a number of proceedings and potential
proceedings relating to environmental matters. Although it is difficult to
estimate the liability of the Company related to these environmental
matters, the Company believes that these matters will not have a materially
adverse effect upon its capital expenditures, earnings or competitive
position.
Additionally, the Company is involved in a number of product liability and
various other suits incident to the operation of its businesses. Insurance
coverages are maintained and estimated costs are recorded for claims and
suits of this nature. It is management's opinion that none of these will
have a materially adverse effect on the Company's financial position,
results of operations or cash flows.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31,
1997 AND DECEMBER 31, 1996
CONTINUING OPERATIONS
Consolidated net sales increased to $3,056 million for the first quarter of
fiscal 1998, an 11% improvement from sales of $2,761 million for the prior year
quarter.
Automotive segment sales of $2,329 million for the quarter were 15% higher than
the prior year's $2,030 million. The increase was primarily attributable to
new seating launches worldwide and higher vehicle production levels in North
America and Europe. North American seating volume rose substantially as the
business benefited from a strong presence in the sport utility and light truck
markets, including programs with the General Motors minivan and Jimmy/Blazer,
the Ford Ranger and Expedition and the Chrysler Jeep. European seating sales
increased over the prior year quarter despite the impact of lower currency
exchange rates. Automotive battery sales also improved, reflecting the
business' continued domestic market share growth, with higher unit shipments to
both the replacement and original equipment markets and the start of shipments
of the Sears DieHard Gold battery.
Controls segment sales were $727 million, a slight decrease from the prior
period's $731 million. The segment's lack of growth stemmed from a relatively
flat contract backlog entering the quarter for the controls systems and
services business, the timing of new integrated facilities management contracts
and the impact of lower currency exchange rates. Worldwide orders for control
systems in the quarter exceeded the prior year period, led by strong order
growth in North America and the Asia/Pacific region.
9
<PAGE> 10
JOHNSON CONTROLS, INC.
Form 10-Q, December 31, 1997
Overall sales growth is expected to continue during the remainder of the fiscal
year. Management expects the automotive segment's sales to increase
approximately 8% to 13% for the full year. The projected increase is due to
the launch of new seating programs worldwide and continued increases in
automotive battery sales. Controls segment sales are expected to improve by 5%
to 10%. Continued growth in integrated facilities management in the domestic
commercial market and higher systems retrofit and service activities are
expected to be the primary sources of the increased sales. Attainment of the
full year expected sales growth for the controls segment assumes that systems
and services orders will continue to be relatively strong during the quarter
ending March 31, 1998.
Consolidated operating income for the first fiscal quarter of 1998 increased to
$148 million, a 14% improvement from the prior year's $130 million. Both of
the Company's operating segments demonstrated strong operating income growth
during the first quarter of the fiscal year.
Automotive segment operating income increased from the prior year period.
Improved performance by the segment's European seating systems business, due to
reduced engineering and operating costs as newer programs moved from start-up
to production, was the primary source of the increase. This increase, as well
as improvements in domestic operating income, more than offset start-up costs
associated with the segment's seating operations in South America.
Controls segment operating income for the first quarter improved from the prior
year due to improved gross margins in the domestic systems and services
business and integrated facilities management business worldwide, as well as
reduced overhead associated with the segment's European operations.
Net interest expense decreased $3 million from the comparable prior year
quarter. The decreased expense primarily reflects the Company's reduction in
its level of short-term debt, as described in the discussion of the Company's
financial condition that follows.
Miscellaneous income (net) of $2 million decreased $4 million from the prior
year period. A factor in the decline was lower equity income earned by the
automotive segment's Mexican affiliate due to increased engineering costs
associated with future programs.
The effective income tax rate associated with continuing operations was 41.5%
for the three-month period ended December 31, 1997 compared with 42.5% for the
comparable quarter last year. The effective rate declined due to improved
performance by certain of the Company's European operations, partially offset
by the costs of start-up operations in emerging markets.
The Company's first quarter income from continuing operations of $65 million
was $10 million, or 19%, higher than the prior year's quarter. The current
quarter's growth was due to improvements in operating income and reduced
interest expense, as noted previously. Basic and diluted earnings per share
from continuing operations for the quarter ended December 31, 1997 were
$0.75 and $0.70, respectively, up from $0.64 and $0.59, respectively, in the
prior year.
10
<PAGE> 11
JOHNSON CONTROLS, INC.
Form 10-Q, December 31, 1997
DISCONTINUED OPERATIONS
On February 28, 1997, the Company completed the sale of its Plastic Container
division (PCD) to Schmalbach-Lubeca AG/Continental Can Europe (a member of the
VIAG Group). Accordingly, operating results, net assets and cash flows of PCD
have been segregated as discontinued operations in the accompanying
consolidated financial statements. The net loss of PCD was $1.8 million, or
$0.02 per diluted share, on sales of $142 million for the three months ended
December 31, 1996.
COMPARISON OF FINANCIAL CONDITION
Working Capital and Cash Flow
- -----------------------------
The Company's negative working capital (excluding "Net assets of discontinued
operations") was $232 million at December 31, 1997, compared with $443 million
and $1,067 million at September 30, 1997 and December 31, 1996, respectively.
The level of working capital has steadily increased since the first quarter of
fiscal 1997, when working capital declined significantly as the Company issued
short-term debt to finance the acquisition of Prince. Since that time, the
Company has used the proceeds from the sale of PCD and its operating cash flows
to reduce short-term debt and improve working capital. Working capital,
excluding cash and debt, increased from fiscal year-end, primarily the result
of higher accounts receivable, but declined compared with the prior year
quarter, due largely to increased accounts payable.
Operating activities of continuing operations provided cash of $59 million
during the first three months of the year compared with $19 million used in the
prior year quarter. The increased cash flow was attributable to higher income
and a change in working capital, primarily an increase in accounts payable and
accrued liabilities.
Capital Expenditures and Other Investments
- ------------------------------------------
Capital expenditures for property, plant and equipment related to continuing
operations were approximately $86 million for the first three months of fiscal
1998, an increase of $23 million from the amount incurred during the first
three months of fiscal 1997. Management projects that capital spending for the
full year will be approximately $350-$375 million. The majority of the
spending has been, and will continue to be, for new automotive seating and
interior product lines and facilities. Cost reduction projects in both the
automotive and controls segments have been initiated during the first quarter
and are planned to continue during the balance of the fiscal year.
11
<PAGE> 12
JOHNSON CONTROLS, INC.
Form 10-Q, December 31, 1997
Investments in partially-owned affiliates of $156 million were $11 million
higher than the balance at September 30, 1997 and $23 million higher than the
balance one year ago. The increase from fiscal year-end primarily relates to
the recording of equity income, led by the automotive segment's affiliates, and
new joint ventures formed in Europe and South America. The increase from the
prior year quarter was due mostly to equity earnings and the formation of a
number of new joint ventures, most notably an automotive battery joint venture
in Brazil.
Capitalization
- --------------
The Company's total capitalization at December 31, 1997 of $3,386 million
included short-term debt of $615 million, long-term debt, including current
portion, of $1,023 million and shareholders' equity of $1,748 million. Total
capitalization at September 30, 1997 and December 31, 1996 was $3,151 million
and $3,868 million, respectively. Total debt as a percentage of total
capitalization increased to 48% from 46% at fiscal year-end but was
significantly less than the 60% level one year ago. The decline from the prior
year period reflects the Company's use of the after-tax proceeds from the sale
of PCD and operating cash flows to reduce its short-term debt. The increase in
the percentage compared with fiscal year-end is due, in part, to a higher cash
balance at period-end. The cash at December 31, 1997 was subsequently used to
reduce short-term debt.
On February 3, 1998, the Company refinanced a portion of its commercial paper
borrowings by issuing $175 million of notes. The 6.3% notes, due in 2008, were
issued under the $1.5 billion shelf registration statement on file with the
Securities and Exchange Commission. Accordingly, at December 31, 1997, $175
million of short-term debt was classified as long-term debt.
The Company believes its capital resources and liquidity position at December
31, 1997 are adequate to meet projected needs. Requirements for working
capital, capital expenditures, dividends and debt maturities in fiscal 1998
will continue to be funded from operations, supplemented by short-term
borrowings, if required, to meet peak seasonal needs.
Backlog
- -------
The Company's backlog relates to the controls segment's systems installation
and services business, which derives a significant portion of its revenues from
long-term contracts that are accounted for using the percentage-of-completion
method. The unearned backlog of commercial building systems and services
contracts (excluding integrated facilities management) to be executed within
the next year at December 31, 1997 was $803 million, compared with $760 million
at September 30, 1997 and $767 million at December 31, 1996. The increase from
September 30 and the prior year primarily represents higher systems retrofit
activity in North America and the Company's success in the new construction
markets overseas.
12
<PAGE> 13
JOHNSON CONTROLS, INC.
Form 10-Q, December 31, 1997
Other Matters
- -------------
The Company has established an ongoing process to identify and resolve the
business issues associated with the Year 2000. A global team of professionals
has been assigned responsibility for addressing the business issues and
monitoring progress toward their resolution. The Company is also participating
in industry-wide efforts on Year 2000 issues that involve its customers and
suppliers. In addition, executive management regularly monitors the status of
the Company's Year 2000 remediation plans. The Company has not identified any
remediation costs that are expected to be material to its operating results or
financial condition. However, if the Company, its customers or vendors are
unable to complete critical Year 2000 compliance efforts in a timely manner, it
could result in a material financial risk. Management believes it is devoting
the necessary resources to resolve all significant Year 2000 issues in a timely
manner.
Cautionary Statements for Forward-Looking Information
- -----------------------------------------------------
The Company has made forward-looking statements in this document that are
subject to risks and uncertainties. Forward-looking statements include
information concerning possible or assumed future risks preceded by, following
or that include the words "believes," "expects," "anticipates" or similar
expressions. For those statements, the Company cautions that the numerous
important factors discussed elsewhere in this document and in the Company's
Form 8-K filing (dated October 30, 1997), 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.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
- ------- -----------------
There have been no significant changes in status since the last Report.
Item 4. Results of Votes of Security Holders
- ------- ------------------------------------
The registrant held its Annual Meeting of Shareholders on January 28, 1998.
Proxies for the meeting were solicited pursuant to Regulation 14; there was no
solicitation in opposition to management's nominees for directors as listed in
the Proxy Statement, and all such nominees (William F. Andrews, Robert L.
Barnett, Willie D. Davis and Richard F. Teerlink) were elected. Of the
78,098,594 shares voted, at least 76,903,466 granted authority to vote for
these directors and no more than 1,195,128 shares withheld such authority.
The retention of Price Waterhouse LLP as auditors was approved by the
shareholders with 77,360,568 shares voted for such appointment, 321,198 shares
voted against, and 416,828 shares abstained.
13
<PAGE> 14
JOHNSON CONTROLS, INC.
Form 10-Q, December 31, 1997
Item 5. Other Information
- ------- -----------------
(a) Rande Somma was elected Corporate Vice President in January 1998.
He has served as President of the Automotive Systems Group's Interior
Trim, Marketing and Business Development business since September
1997. Mr. Somma served in several senior management positions within
the Automotive Systems Group since joining the Company in 1988.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
12 Statement regarding the computation of the ratio of
earnings to fixed charges.
27 Financial Data Schedule (electronic filing only).
(b) The following Form 8-K's were filed during the three months ended
December 31, 1997:
(1) On October 30, 1997, the Company filed a form 8-K in order
to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 and to provide updated
disclosure of the factors that could affect any forward-looking
statements made by, or on behalf of, the Company.
(2) On December 23, 1997, the Company filed a form 8-K to
announce the commencement of a program to offer its medium-term
notes in an aggregate initial offering price of up to $500 million.
The notes are available under the Company's $1.5 billion universal
shelf registration statement.
14
<PAGE> 15
JOHNSON CONTROLS, INC.
Form 10-Q, December 31, 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 thereunto duly authorized.
JOHNSON CONTROLS, INC.
Date: February 13, 1998 By: Stephen A. Roell
Vice President and
Chief Financial Officer
15
<PAGE> 1
EXHIBIT 12
JOHNSON CONTROLS, INC.
COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
(Dollars In millions)
<TABLE>
<CAPTION>
For the Three Months
Ended December 31, 1997
------------------------------
<S> <C>
Income from continuing operations $ 65.3
Provision for income taxes 50.8
Undistributed earnings of partially-owned affiliates (4.1)
Minority interests in net earnings of subsidiaries 6.2
Amortization of previously capitalized interest 0.8
------
119.0
------
Fixed charges:
Interest incurred and amortization of debt expense 33.3
Estimated portion of rent expense 8.9
------
Fixed charges 42.2
Less: Interest capitalized during the period (1.3)
------
40.9
------
Earnings $159.9
======
Ratio of earnings to fixed charges 3.8
======
</TABLE>
For the purpose of computing this ratio, "earnings" consist of (a) income
from continuing operations before income taxes (adjusted for undistributed
earnings or recognized losses of partially-owned affiliates which are less
than 50% owned, minority interests in net earnings of subsidiaries, and
amortization of previously capitalized interest), plus (b) fixed charges,
minus (c) interest capitalized during the period. "Fixed charges" consist
of (a) interest incurred and amortization of debt expense plus (b) the
portion of rent expense representative of the interest factor.
16
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000053669
<NAME> JOHNSON CONTROLS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 248,100
<SECURITIES> 0
<RECEIVABLES> 1,863,600
<ALLOWANCES> 19,900
<INVENTORY> 390,000
<CURRENT-ASSETS> 2,883,900
<PP&E> 3,181,500
<DEPRECIATION> 1,633,400
<TOTAL-ASSETS> 6,408,500
<CURRENT-LIABILITIES> 3,116,000
<BONDS> 964,800
0
142,800
<COMMON> 14,500
<OTHER-SE> 1,590,900
<TOTAL-LIABILITY-AND-EQUITY> 6,408,500
<SALES> 3,056,300
<TOTAL-REVENUES> 3,056,300
<CGS> 2,622,100
<TOTAL-COSTS> 2,622,100
<OTHER-EXPENSES> 279,700
<LOSS-PROVISION> 2,100
<INTEREST-EXPENSE> 30,100
<INCOME-PRETAX> 122,300
<INCOME-TAX> 50,800
<INCOME-CONTINUING> 65,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,300
<EPS-PRIMARY> .75
<EPS-DILUTED> .70
</TABLE>
