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EX-12 - EX-12 - JOHNSON CONTROLS INC | c55238exv12.htm |
EX-32 - EX-32 - JOHNSON CONTROLS INC | c55238exv32.htm |
EX-15 - EX-15 - JOHNSON CONTROLS INC | c55238exv15.htm |
EX-31.1 - EX-31.1 - JOHNSON CONTROLS INC | c55238exv31w1.htm |
EX-31.2 - EX-31.2 - JOHNSON CONTROLS INC | c55238exv31w2.htm |
EXCEL - IDEA: XBRL DOCUMENT - JOHNSON CONTROLS INC | Financial_Report.xls |
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2009
OR
o | 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 (State or Other Jurisdiction of Incorporation or Organization) |
39-0380010 (I.R.S. Employer Identification No.) |
|
5757 North Green Bay Avenue Milwaukee, Wisconsin (Address of principal executive offices) |
53209 (Zip Code) |
(414) 524-1200
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
(Former name, former address and former fiscal year, if changed since last report)
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date.
Class | Shares Outstanding at December 31, 2009 | |
Common Stock: $0.01 7/18 par value per share | 671,735,812 |
JOHNSON CONTROLS, INC.
Form 10-Q
Report Index
2
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Johnson Controls, Inc.
Condensed Consolidated Statements of Financial Position
(in millions; unaudited)
December 31, | September 30, | December 31, | ||||||||||
2009 | 2009 | 2008 | ||||||||||
Assets |
||||||||||||
Cash and cash equivalents |
$ | 791 | $ | 761 | $ | 202 | ||||||
Accounts receivable net |
5,154 | 5,528 | 5,063 | |||||||||
Inventories |
1,571 | 1,521 | 1,935 | |||||||||
Other current assets |
2,160 | 2,016 | 1,517 | |||||||||
Current assets |
9,676 | 9,826 | 8,717 | |||||||||
Property, plant and equipment net |
3,918 | 3,986 | 4,115 | |||||||||
Goodwill |
6,506 | 6,542 | 6,392 | |||||||||
Other intangible assets net |
735 | 746 | 757 | |||||||||
Investments in partially-owned affiliates |
760 | 718 | 703 | |||||||||
Other noncurrent assets |
2,210 | 2,270 | 1,620 | |||||||||
Total assets |
$ | 23,805 | $ | 24,088 | $ | 22,304 | ||||||
Liabilities and Equity |
||||||||||||
Short-term debt |
$ | 361 | $ | 658 | $ | 985 | ||||||
Current portion of long-term debt |
6 | 140 | 452 | |||||||||
Accounts payable |
4,504 | 4,434 | 3,779 | |||||||||
Accrued compensation and benefits |
853 | 872 | 804 | |||||||||
Other current liabilities |
2,663 | 2,612 | 2,521 | |||||||||
Current liabilities |
8,387 | 8,716 | 8,541 | |||||||||
Long-term debt |
3,077 | 3,168 | 3,176 | |||||||||
Postretirement health and other benefits |
209 | 255 | 228 | |||||||||
Other noncurrent liabilities |
2,576 | 2,610 | 1,817 | |||||||||
Long-term liabilities |
5,862 | 6,033 | 5,221 | |||||||||
Commitments and contingencies (Note 19) |
||||||||||||
Shareholders equity attributable to Johnson Controls, Inc. |
9,353 | 9,138 | 8,313 | |||||||||
Noncontrolling interests |
203 | 201 | 229 | |||||||||
Total equity |
9,556 | 9,339 | 8,542 | |||||||||
Total liabilities and equity |
$ | 23,805 | $ | 24,088 | $ | 22,304 | ||||||
The accompanying notes are an integral part of the financial statements.
3
Table of Contents
Johnson Controls, Inc.
Consolidated Statements of Income
(in millions, except per share data; unaudited)
Three Months Ended | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
Net sales |
||||||||
Products and systems* |
$ | 6,676 | $ | 5,647 | ||||
Services* |
1,732 | 1,689 | ||||||
8,408 | 7,336 | |||||||
Cost of sales |
||||||||
Products and systems |
5,756 | 5,273 | ||||||
Services |
1,416 | 1,378 | ||||||
7,172 | 6,651 | |||||||
Gross profit |
1,236 | 685 | ||||||
Selling, general and administrative expenses |
(883 | ) | (859 | ) | ||||
Net financing charges |
(35 | ) | (56 | ) | ||||
Equity income (loss) |
53 | (136 | ) | |||||
Income (loss) before income taxes |
371 | (366 | ) | |||||
Provision for income taxes |
5 | 242 | ||||||
Net income (loss) |
366 | (608 | ) | |||||
Income attributable to noncontrolling interests |
16 | | ||||||
Net income (loss) attributable to Johnson Controls, Inc. |
$ | 350 | $ | (608 | ) | |||
Earnings (loss) per share |
||||||||
Basic |
$ | 0.52 | $ | (1.02 | ) | |||
Diluted |
$ | 0.52 | $ | (1.02 | ) |
* | Products and systems consist of automotive experience and power solutions products and systems and building efficiency installed systems. Services are building efficiency technical and global workplace solutions. |
The accompanying notes are an integral part of the financial statements.
4
Table of Contents
Johnson Controls, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions; unaudited)
Three Months Ended | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
Operating Activities |
||||||||
Net income (loss) attributable to Johnson Controls, Inc. |
$ | 350 | $ | (608 | ) | |||
Income attributable to noncontrolling interests |
16 | | ||||||
Net income (loss) |
366 | (608 | ) | |||||
Adjustments to reconcile net income (loss) to
cash provided (used) by operating activities: |
||||||||
Depreciation |
169 | 181 | ||||||
Amortization of intangibles |
11 | 9 | ||||||
Equity in earnings of partially-owned affiliates,
net of dividends received |
(12 | ) | 184 | |||||
Deferred income taxes |
(62 | ) | 300 | |||||
Impairment charges |
| 110 | ||||||
Equity-based compensation |
20 | 20 | ||||||
Other |
9 | 15 | ||||||
Changes in working capital, excluding acquisitions: |
||||||||
Accounts receivable |
352 | 1,128 | ||||||
Inventories |
(56 | ) | 78 | |||||
Other current assets |
(87 | ) | 85 | |||||
Restructuring reserves |
(58 | ) | (52 | ) | ||||
Accounts payable and accrued liabilities |
143 | (1,656 | ) | |||||
Accrued income taxes |
13 | (111 | ) | |||||
Cash provided (used) by operating activities |
808 | (317 | ) | |||||
Investing Activities |
||||||||
Capital expenditures |
(177 | ) | (268 | ) | ||||
Sale of property, plant and equipment |
19 | 3 | ||||||
Acquisition of businesses, net of cash acquired |
| (22 | ) | |||||
Recoverable customer engineering expenditures |
(22 | ) | (22 | ) | ||||
Changes in long-term investments |
(5 | ) | (48 | ) | ||||
Cash used by investing activities |
(185 | ) | (357 | ) | ||||
Financing Activities |
||||||||
Increase (decrease) in short-term debt net |
(284 | ) | 549 | |||||
Repayment of long-term debt |
(240 | ) | (9 | ) | ||||
Payment of cash dividends |
(77 | ) | (77 | ) | ||||
Other |
8 | 29 | ||||||
Cash provided (used) by financing activities |
(593 | ) | 492 | |||||
Increase (decrease) in cash and cash equivalents |
$ | 30 | $ | (182 | ) | |||
The accompanying notes are an integral part of the financial statements.
5
Table of Contents
Johnson
Controls, Inc.
Notes to Condensed Consolidated Financial Statements
December 31, 2009
(unaudited)
Notes to Condensed Consolidated Financial Statements
December 31, 2009
(unaudited)
1. | Financial Statements |
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been condensed or omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Johnson Controls, Inc. (the Company) Annual Report on Form 10-K for the year ended September 30, 2009. The results of operations for the three month period ended December 31, 2009 are not necessarily indicative of results for the Companys 2010 fiscal year because of seasonal and other factors. |
The consolidated financial statements include the accounts of Johnson Controls, Inc. and its domestic and non-U.S subsidiaries that are consolidated in conformity with U.S. GAAP. All significant intercompany transactions have been eliminated. Investments in partially-owned affiliates are accounted for by the equity method when the Companys interest exceeds 20% and the Company does not have a controlling interest. |
The financial results for the three month period ended December 31, 2008 include an out of period adjustment made to correct an error related to the power solutions segment. The correction of the error, which reduced segment income by $33 million in the three month period ended December 31, 2008, primarily originated in fiscal 2007 and 2008 and resulted in the overstatement of inventory and understatement of cost of sales in prior periods. The Company determined that the impact of the error on the originating periods was immaterial, and accordingly a restatement of prior period amounts was not considered necessary. The Company also determined the impact of correcting the error in fiscal 2009 was not material. |
Under certain criteria as provided for in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810, Consolidation, the Company may consolidate a partially-owned affiliate when it has less than a 50% ownership. In order to determine whether to consolidate a partially-owned affiliate when the Company has less than a 50% ownership, we first determine if the entity is a variable interest entity (VIE). An entity is considered to be a VIE if it has one of the following characteristics: 1) the entity is thinly capitalized; 2) residual equity holders do not control the entity; 3) equity holders are shielded from economic losses or do not participate fully in the entitys residual economics; or 4) the entity was established with non-substantive voting. If the entity meets one of these characteristics, we then determine if the Company is the primary beneficiary of the VIE. The party exposed to the majority of the risks and rewards associated with the VIE is the VIEs primary beneficiary and must consolidate the entity. |
Based upon the criteria set forth in ASC 810, the Company has determined that for the reporting periods ended December 31, 2009, September 30, 2009 and December 31, 2008 it was the primary beneficiary in two VIEs in which it holds less than 50% ownership as the Company funds the entities short-term liquidity needs. Both entities are consolidated within the automotive experience North America segment. The Company did not have a significant variable interest in any unconsolidated VIEs for the presented reporting periods. The carrying amounts and classification of assets and liabilities included in our consolidated statements of financial position for consolidated VIEs are as follows (in millions): |
December 31, | September 30, | December 31, | ||||||||||
2009 | 2009 | 2008 | ||||||||||
Current assets |
$ | 112 | $ | 146 | $ | 125 | ||||||
Noncurrent assets |
98 | 101 | 118 | |||||||||
Total assets |
$ | 210 | $ | 247 | $ | 243 | ||||||
Current liabilities |
$ | 94 | $ | 103 | $ | 93 | ||||||
Noncurrent liabilities |
| | | |||||||||
Total liabilities |
$ | 94 | $ | 103 | $ | 93 | ||||||
6
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
2. | New Accounting Standards | |
In December 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. ASU No. 2009-17 changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entitys purpose and design and a companys ability to direct the activities of the entity that most significantly impact the entitys economic performance. This statement is effective for the Company beginning in the first quarter of fiscal 2011 (October 1, 2010). The Company is assessing the potential impact that the adoption of ASU No. 2009-17 will have on its consolidated financial condition and results of operations. |
In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements a consensus of the FASB Emerging Issues Task Force. ASU No. 2009-13 establishes the accounting and reporting guidance for arrangements under which a vendor will perform multiple revenue-generating activities. Specifically, this ASU addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. This guidance will be effective for the Company beginning in the first quarter of fiscal 2011 (October 1, 2010) and, when adopted, will change the Companys accounting treatment for multiple-element revenue arrangements on a prospective basis. |
In December 2008, the FASB issued guidance on an employers disclosures about plan assets of a defined benefit pension plan. The guidance requires enhanced transparency surrounding the types of plan assets and associated risks, as well as disclosure of information about fair value measurements of plan assets. This guidance is included in ASC 715, Compensation - Retirement Benefits, and is effective for the Company for the fiscal year ending September 30, 2010. The adoption of this guidance will have no impact on the Companys consolidated financial condition and results of operations. |
In December 2007, the FASB issued guidance changing the accounting for business combinations in a number of areas including the treatment of contingent consideration, preacquisition contingencies, transaction costs, in-process research and development and restructuring costs. In addition, under this guidance changes in an acquired entitys deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. This guidance is included in ASC 805, Business Combinations, and is effective for the Company in the first quarter of fiscal 2010 (October 1, 2009). This guidance changes the Companys accounting treatment for business combinations on a prospective basis. |
In December 2007, the FASB issued guidance changing the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. This new consolidation method changes the accounting for transactions with minority interest holders. This guidance is included in ASC 810, Consolidation, and is effective for fiscal years beginning after December 15, 2008. This guidance is effective for the Company in the first quarter of fiscal 2010 (October 1, 2009). The adoption of this guidance has had no material impact on the Companys consolidated financial condition and results of operations. Refer to Note 14, Equity Attributable to Johnson Controls, Inc. and Noncontrolling Interests for further discussion. |
In September 2006, the FASB issued guidance that defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This guidance also establishes a fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability. This guidance is included in ASC 820, Fair Value Measurements and Disclosures. The Company adopted this guidance effective October 1, 2008. In February 2008, the FASB delayed the effective date of this guidance for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed in the financial statements on a nonrecurring basis to fiscal years beginning after November 15, 2008. The provisions of this guidance for nonfinancial assets and nonfinancial liabilities are effective for the Company in the first quarter of fiscal 2010 (October 1, 2009) and will be applied prospectively to fair value assessments such as the Companys goodwill impairment analysis. |
7
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
3. | Acquisition of Businesses |
During the first quarter of fiscal 2010, the Company made no acquisitions. In the first quarter of fiscal 2009, the Company completed one acquisition for a purchase price of $27 million, of which $22 million was paid as of December 31, 2008. The acquisition was not material to the Companys consolidated financial statements. In connection with the acquisition, the Company recorded goodwill of $24 million. |
4. | Percentage-of-Completion Contracts |
The building efficiency business records certain long-term contracts under the percentage-of-completion method of accounting. Under this method, sales and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. The Company records costs and earnings in excess of billings on uncompleted contracts within accounts receivable net and billings in excess of costs and earnings on uncompleted contracts within other current liabilities in the condensed consolidated statements of financial position. Amounts included within accounts receivable - net related to these contracts were $588 million, $579 million and $613 million at December 31, 2009, September 30, 2009 and December 31, 2008, respectively. Amounts included within other current liabilities were $636 million, $601 million and $625 million at December 31, 2009, September 30, 2009 and December 31, 2008, respectively. |
5. | Inventories |
Inventories consisted of the following (in millions): |
December 31, | September 30, | December 31, | ||||||||||
2009 | 2009 | 2008 | ||||||||||
Raw materials and supplies |
$ | 749 | $ | 712 | $ | 838 | ||||||
Work-in-process |
223 | 225 | 271 | |||||||||
Finished goods |
689 | 674 | 910 | |||||||||
FIFO inventories |
1,661 | 1,611 | 2,019 | |||||||||
LIFO reserve |
(90 | ) | (90 | ) | (84 | ) | ||||||
Inventories |
$ | 1,571 | $ | 1,521 | $ | 1,935 | ||||||
6. | Goodwill and Other Intangible Assets |
The changes in the carrying amount of goodwill in each of the Companys reporting segments for the nine month period ended September 30, 2009 and the three month period ended December 31, 2009 were as follows (in millions): |
8
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
Currency | ||||||||||||||||
December 31, | Business | Translation | September 30, | |||||||||||||
2008 | Acquisitions | and Other | 2009 | |||||||||||||
Building efficiency |
||||||||||||||||
North America systems |
$ | 515 | $ | | $ | 10 | $ | 525 | ||||||||
North America service |
657 | | 11 | 668 | ||||||||||||
North America unitary
products |
481 | | 9 | 490 | ||||||||||||
Global workplace solutions |
178 | | (4 | ) | 174 | |||||||||||
Europe |
418 | | (10 | ) | 408 | |||||||||||
Rest of world |
532 | | 55 | 587 | ||||||||||||
Automotive experience |
||||||||||||||||
North America |
1,354 | 21 | 1 | 1,376 | ||||||||||||
Europe |
1,155 | 2 | 54 | 1,211 | ||||||||||||
Asia |
214 | | 9 | 223 | ||||||||||||
Power solutions |
888 | | (8 | ) | 880 | |||||||||||
Total |
$ | 6,392 | $ | 23 | $ | 127 | $ | 6,542 | ||||||||
Currency | ||||||||||||||||
September 30, | Business | Translation | December 31, | |||||||||||||
2009 | Acquisitions | and Other | 2009 | |||||||||||||
Building efficiency |
||||||||||||||||
North America systems |
$ | 525 | $ | | $ | | $ | 525 | ||||||||
North America service |
668 | | | 668 | ||||||||||||
North America unitary
products |
490 | | | 490 | ||||||||||||
Global workplace solutions |
174 | | | 174 | ||||||||||||
Europe |
408 | | (5 | ) | 403 | |||||||||||
Rest of world |
587 | | (8 | ) | 579 | |||||||||||
Automotive experience |
||||||||||||||||
North America |
1,376 | | 2 | 1,378 | ||||||||||||
Europe |
1,211 | | (12 | ) | 1,199 | |||||||||||
Asia |
223 | | (9 | ) | 214 | |||||||||||
Power solutions |
880 | | (4 | ) | 876 | |||||||||||
Total |
$ | 6,542 | $ | | $ | (36 | ) | $ | 6,506 | |||||||
9
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Companys other intangible assets, primarily from business acquisitions, are valued based on independent appraisals and consisted of (in millions): |
December 31, 2009 | September 30, 2009 | December 31, 2008 | ||||||||||||||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||||||||||||||||
Amount | Amortization | Net | Amount | Amortization | Net | Amount | Amortization | Net | ||||||||||||||||||||||||||||
Amortized intangible assets |
||||||||||||||||||||||||||||||||||||
Patented technology |
$ | 307 | $ | (196 | ) | $ | 111 | $ | 308 | $ | (190 | ) | $ | 118 | $ | 298 | $ | (170 | ) | $ | 128 | |||||||||||||||
Unpatented
technology |
24 | (12 | ) | 12 | 24 | (12 | ) | 12 | 23 | (10 | ) | 13 | ||||||||||||||||||||||||
Customer
relationships |
344 | (58 | ) | 286 | 345 | (56 | ) | 289 | 343 | (45 | ) | 298 | ||||||||||||||||||||||||
Miscellaneous |
45 | (16 | ) | 29 | 43 | (13 | ) | 30 | 33 | (12 | ) | 21 | ||||||||||||||||||||||||
Total amortized
intangible assets |
720 | (282 | ) | 438 | 720 | (271 | ) | 449 | 697 | (237 | ) | 460 | ||||||||||||||||||||||||
Unamortized intangible assets |
||||||||||||||||||||||||||||||||||||
Trademarks |
297 | | 297 | 297 | | 297 | 297 | | 297 | |||||||||||||||||||||||||||
Total intangible assets |
$ | 1,017 | $ | (282 | ) | $ | 735 | $ | 1,017 | $ | (271 | ) | $ | 746 | $ | 994 | $ | (237 | ) | $ | 757 | |||||||||||||||
Amortization of other intangible assets for the three month periods ended December 31, 2009 and 2008 was $11 million and $9 million, respectively. Excluding the impact of any future acquisitions, the Company anticipates amortization of other intangible assets will average approximately $34 million per year over the next five years. |
7. | Product Warranties |
The Company offers warranties to its customers depending upon the specific product and terms of the customer purchase agreement. A typical warranty program requires that the Company replace defective products within a specified time period from the date of sale. The Company records an estimate for future warranty-related costs based on actual historical return rates and other known factors. Based on analysis of return rates and other factors, the adequacy of the Companys warranty provisions are adjusted as necessary. While the Companys warranty costs have historically been within its calculated estimates, the Company monitors its warranty activity and adjusts its reserve estimates when it is probable that future warranty costs will be different than those estimates. During the fourth quarter of fiscal 2009, the building efficiency North America unitary products segment increased its warranty reserve by $29 million as a result of the Companys periodic warranty review process and analysis of return rates. | ||
The Companys product warranty liability is recorded in the consolidated statement of financial position in other current liabilities if the warranty is less than one year and in other noncurrent liabilities if the warranty extends longer than one year. | ||
The changes in the carrying amount of the Companys total product warranty liability for the three months ended December 31, 2009 and 2008 were as follows (in millions): |
2009 | 2008 | |||||||
Balance as of September 30 |
$ | 344 | $ | 204 | ||||
Accruals for warranties issued during the period |
66 | 47 | ||||||
Accruals from acquisitions |
| | ||||||
Accruals related to pre-existing warranties (including
changes in estimates) |
| | ||||||
Settlements made (in cash or in kind) during the period |
(77 | ) | (55 | ) | ||||
Currency translation |
| (5 | ) | |||||
Balance as of December 31 |
$ | 333 | $ | 191 | ||||
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Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
8. | Restructuring Costs |
To better align the Companys cost structure with global automotive market conditions, the Company committed to a restructuring plan (2009 Plan) in the second quarter of fiscal 2009 and recorded a $230 million restructuring charge. The restructuring charge relates to cost reduction initiatives in the Companys automotive experience, building efficiency and power solutions businesses and includes workforce reductions and plant consolidations. The Company expects to substantially complete the 2009 Plan by the end of 2010. The automotive-related restructuring actions target excess manufacturing capacity resulting from lower industry production in the European, North American and Japanese automotive markets. The restructuring actions in building efficiency are primarily in Europe where the Company is centralizing certain functions and rebalancing its resources to target the geographic markets with the greatest potential growth. Power solutions actions are focused on optimizing its manufacturing capacity as a result of lower overall demand for original equipment batteries resulting from lower vehicle production levels. | ||
Since the announcement of the 2009 Plan in March 2009, the Company has experienced lower employee severance and termination benefit cash payouts than previously calculated for automotive experience Europe of approximately $43 million, of which $15 million was identified in the quarter ended December 31, 2009, due to favorable severance negotiations and the decision to not close one of the previously planned plants in response to increased customer demand. In response to the depressed automotive industry in Europe, the Company has committed to the closure of one additional plant in Europe since the announcement of its 2009 Plan. The underspend of the initial 2009 Plan reserves will be utilized for this plant consolidation which is expected to occur in late fiscal 2010 and for additional costs to be incurred as part of power solutions and automotive experience Europes original cost reduction initiatives. The planned workforce reductions disclosed for the 2009 Plan have been updated for the Companys revised actions. | ||
The 2009 Plan includes workforce reductions of approximately 6,300 employees (2,900 for automotive experience North America, 1,700 for automotive experience Europe, 600 for automotive experience Asia, 200 for building efficiency North America, 400 for building efficiency Europe, 200 for building efficiency rest of world, and 300 for power solutions). Restructuring charges associated with employee severance and termination benefits are paid over the severance period granted to each employee and on a lump sum basis when required in accordance with individual severance agreements. As of December 31, 2009, approximately 5,000 of the employees have been separated from the Company pursuant to the 2009 Plan. In addition, the 2009 Plan includes 9 plant closures (3 for automotive experience North America, 1 for automotive experience Europe, 3 for automotive experience Asia, 1 for building efficiency rest of world, and 1 for power solutions). As of December 31, 2009, 6 of the 9 plants have been closed. The restructuring charge for the impairment of long-lived assets associated with the plant closures was determined using fair value based on a discounted cash flow analysis or appraisals. | ||
The following table summarizes the changes in the Companys 2009 Plan reserve, included within other current liabilities in the consolidated statements of financial position (in millions): |
Employee | ||||||||||||||||
Severance and | ||||||||||||||||
Termination | Currency | |||||||||||||||
Benefits | Other | Translation | Total | |||||||||||||
Balance at September 30, 2009 |
$ | 140 | $ | 2 | $ | 8 | $ | 150 | ||||||||
Utilized Cash |
(22 | ) | | | (22 | ) | ||||||||||
Utilized Noncash |
| (2 | ) | (1 | ) | (3 | ) | |||||||||
Noncash Adjustment Underspend |
(15 | ) | | | (15 | ) | ||||||||||
Noncash Adjustment Revised Actions |
15 | | | 15 | ||||||||||||
Balance at December 31, 2009 |
$ | 118 | $ | | $ | 7 | $ | 125 | ||||||||
To better align the Companys resources with its growth strategies while reducing the cost structure of its global operations, the Company committed to a restructuring plan (2008 Plan) in the fourth quarter of fiscal |
11
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
2008 and recorded a $495 million restructuring charge. The restructuring charge relates to cost reduction initiatives in its automotive experience, building efficiency and power solutions businesses and includes workforce reductions and plant consolidations. The Company expects to substantially complete the 2008 Plan in 2010. The automotive-related restructuring is in response to the fundamentals of the European and North American automotive markets. The actions target reductions in the Companys cost base by decreasing excess manufacturing capacity due to lower industry production and the continued movement of vehicle production to low-cost countries, especially Europe. The restructuring actions in building efficiency are primarily in Europe where the Company is centralizing certain functions and rebalancing its resources to target the geographic markets with the greatest potential growth. Power solutions actions are focused on optimizing its regional manufacturing capacity. | ||
Since the announcement of the 2008 Plan in September 2008, the Company has experienced lower employee severance and termination benefit cash payouts than previously calculated for building efficiency Europe and automotive experience Europe of approximately $63 million, all of which was identified in fiscal 2009, due to favorable severance negotiations, individuals transferred to open positions within the Company and changes in cost reduction actions from plant consolidation to downsizing of operations. The underspend of the initial 2008 Plan will be utilized for similar restructuring actions to be performed during fiscal 2010. The underspend incurred by building efficiency Europe will be utilized for workforce reductions and plant consolidations in building efficiency Europe. The underspend incurred by automotive experience Europe will be utilized for one additional plant consolidation for automotive experience Europe. The planned workforce reductions disclosed for the 2008 Plan have been updated for the Companys revised actions. | ||
The 2008 Plan includes workforce reductions of approximately 10,700 employees (3,700 for automotive experience North America, 3,800 for automotive experience Europe, 400 for building efficiency North America, 1,500 for building efficiency Europe, 800 for building efficiency rest of world and 500 for power solutions). Restructuring charges associated with employee severance and termination benefits are paid over the severance period granted to each employee and on a lump sum basis when required in accordance with individual severance agreements. As of December 31, 2009, approximately 9,000 of the employees have been separated from the Company pursuant to the 2008 Plan. In addition, the 2008 Plan includes 22 plant closures (9 for automotive experience North America, 10 for automotive experience Europe, 1 for building efficiency North America, and 2 for power solutions). As of December 31, 2009, 13 of the 22 plants have been closed. The restructuring charge for the impairment of long-lived assets associated with the plant closures was determined using fair value based on a discounted cash flow analysis or appraisals. | ||
The following table summarizes the changes in the Companys 2008 Plan reserve, included within other current liabilities in the consolidated statements of financial position (in millions): |
Employee | ||||||||||||
Severance and | ||||||||||||
Termination | Currency | |||||||||||
Benefits | Translation | Total | ||||||||||
Balance at September 30, 2009 |
$ | 215 | $ | (18 | ) | $ | 197 | |||||
Utilized Cash |
(36 | ) | | (36 | ) | |||||||
Utilized Noncash |
| (1 | ) | (1 | ) | |||||||
Balance at December 31, 2009 |
$ | 179 | $ | (19 | ) | $ | 160 | |||||
Company management closely monitors its overall cost structure and continually analyzes each of its businesses for opportunities to consolidate current operations, improve operating efficiencies and locate facilities in low cost countries in close proximity to customers. This ongoing analysis includes a review of its manufacturing, engineering and purchasing operations, as well as the overall global footprint for all its businesses. Because of the importance of new vehicle sales by major automotive manufacturers to operations, the Company is affected by the general business conditions in this industry. Future adverse developments in the automotive industry could impact the Companys liquidity position, lead to impairment charges and/or require additional restructuring of its operations. |
12
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
9. | Research and Development |
Expenditures for research activities relating to product development and improvement are charged against income as incurred and included within selling, general and administrative expenses in the consolidated statement of income. A portion of the costs associated with these activities is reimbursed by customers. Such expenditures amounted to $87 million and $97 million for the three months ended December 31, 2009 and 2008, respectively. These expenditures are net of customer reimbursements of $86 million and $87 million for the three months ended December 31, 2009 and 2008, respectively. |
10. | Income Taxes |
The more significant components of the Companys income tax provision from continuing operations for the three months ended December 31, 2009 and 2008 are as follows (in millions): |
Three Months Ended December 31, | ||||||||||||||||
2009 | Tax rate | 2008 | Tax rate | |||||||||||||
Income taxes at annual effective rate |
$ | 67 | 18.0 | % | $ | (88 | ) | 24.0 | % | |||||||
Discrete period items: |
||||||||||||||||
Valuation allowance adjustments |
(93 | ) | 300 | |||||||||||||
Uncertain tax positions |
31 | | ||||||||||||||
Impairment charges |
| 30 | ||||||||||||||
Provision for income taxes |
$ | 5 | 1.3 | % | $ | 242 | -66.1 | % | ||||||||
Effective Tax Rate | ||
In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter. In the current fiscal quarter, the Companys estimated annual effective income tax rate of 18% is lower than the prior year rate of 24% during the three months ended December 31, 2008, primarily due to change in the geographic split of income and global tax planning initiatives. | ||
Valuation Allowance Adjustment | ||
The Company reviews its deferred tax asset valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with any other positive or negative evidence. Since future financial results may differ from previous estimates, periodic adjustments to the Companys valuation allowances may be necessary. | ||
In the first quarter of fiscal 2010, the Company determined that it is more likely than not that a portion of the deferred tax assets in Brazil would be utilized. Therefore, the Company released $69 million of valuation allowances. This is comprised of a $93 million decrease in income tax expense offset by a $24 million reduction in cumulative translation adjustments. | ||
In the first quarter of fiscal 2009, as a result of the rapid deterioration in the economic environment, several jurisdictions incurred unexpected losses in the first quarter that resulted in cumulative losses over the prior three years. As a result, and after considering tax planning initiatives and other positive and negative evidence, the Company determined that it was more likely than not that the deferred tax assets would not be utilized in several jurisdictions including France, Mexico, Spain and the United Kingdom. Therefore, the Company recorded a $300 million valuation allowance as income tax expense. To the extent the Company improves its underlying operating results in these jurisdictions, these valuation allowances, or a portion thereof, could be reversed in future periods. |
13
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
Impairment Charges | ||
In the first quarter of fiscal year 2009, the Company recorded a $30 million discrete period tax adjustment related to first quarter 2009 impairment costs using a blended statutory tax rate of 12.6%. | ||
Uncertain Tax Positions | ||
At September 30, 2009, the Company had gross tax effected unrecognized tax benefits of $1,049 million of which $874 million, if recognized, would impact the effective tax rate. Total net accrued interest at September 30, 2009 was approximately $68 million (net of tax benefit). The net change in interest and penalties during the three months ended December 31, 2009 was $35 million, including $9 million of quarterly interest expense on existing uncertain tax positions and $26 million related to the events described below, and was not material for the same period in fiscal 2009. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense or goodwill, when applicable. | ||
As a result of certain recent events related to prior year tax planning initiatives, during the first quarter of fiscal 2010, the Company increased the reserve for uncertain tax positions by $31 million, including $26 million of interest and penalties, which impacts the effective tax rate. | ||
The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. Judgment is required in determining its worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of the Companys business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is regularly under audit by tax authorities, including major jurisdictions noted below: |
Tax Jurisdiction | Statute of Limitations | |
Austria
|
5 years | |
Belgium
|
3 years | |
Brazil
|
5 years | |
Canada
|
5 years | |
China
|
3 to 5 years | |
Czech Republic
|
3 years | |
France
|
3 years | |
Germany
|
4 to 5 years | |
Italy
|
4 years | |
Japan
|
5 to 7 years | |
Mexico
|
5 years | |
Spain
|
4 years | |
United Kingdom
|
6 years | |
United States Federal
|
3 years | |
United States State
|
3 to 5 years |
In the U.S., the 2004 through 2006 fiscal years are currently under exam by the Internal Revenue Service and the fiscal years 1999 to 2001 are currently under IRS Appeals. Additionally, the Company is currently under exam in the following major foreign jurisdictions: |
Tax Jurisdiction | Tax Years Covered | |
Austria
|
2003 2005 | |
Belgium
|
2005 2008 | |
Brazil
|
2005 2008 | |
Canada
|
2004 2006 | |
France Germany |
2005 2008 2001 2007 |
|
Italy
|
2004 2006 | |
Mexico
|
2003 2004 | |
Spain
|
2003 2005 |
14
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
It is reasonably possible that certain tax examinations, appellate proceedings and/or tax litigation will conclude within the next 12 months, which may result in tax reserve adjustments up to $75 million. | ||
Impacts of Tax Legislation | ||
During the period ending December 31, 2009 tax legislation was adopted in various jurisdictions including Mexico, France and Brazil. None of these changes will have a material impact on the Companys consolidated financial condition, results of operations or cash flows. |
11. | Retirement Plans |
The components of the Companys net periodic benefit costs associated with its defined benefit pension plans and other postretirement health and other benefits are shown in the tables below in accordance with ASC 715, Compensation Retirement Benefits (in millions): |
Pension Plans | ||||||||||||||||
U.S. Plans | Non-U.S. Plans | |||||||||||||||
Three Months | Three Months | |||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Service cost |
$ | 17 | $ | 17 | $ | 9 | $ | 8 | ||||||||
Interest cost |
38 | 40 | 18 | 16 | ||||||||||||
Expected return on plan assets |
(45 | ) | (45 | ) | (16 | ) | (13 | ) | ||||||||
Amortization of net actuarial loss |
7 | 1 | 3 | 1 | ||||||||||||
Net periodic benefit cost |
$ | 17 | $ | 13 | $ | 14 | $ | 12 | ||||||||
Postretirement Health | ||||||||
and Other Benefits | ||||||||
Three Months | ||||||||
Ended December 31, | ||||||||
2009 | 2008 | |||||||
Service cost |
$ | 1 | $ | 1 | ||||
Interest cost |
3 | 5 | ||||||
Amortization of net actuarial gain |
| (1 | ) | |||||
Amortization of prior service credit |
(4 | ) | (2 | ) | ||||
Net periodic benefit cost |
$ | | $ | 3 | ||||
12. | Debt and Financing Arrangements |
During the quarter ended December 31, 2009, the Company retired approximately $13 million in principal amount of its fixed rate bonds that was scheduled to mature on January 15, 2011. Additionally, the Company repurchased 1,685 bonds ($1,685,000 par value) of its 6.5% convertible senior notes maturing September 30, 2012. The Company used cash to fund the repurchases. | ||
During the quarter ended December 31, 2009, the Company retired its 12 billion yen, three year, floating rate loan agreement that matured. Additionally, the Company retired its 7 billion yen, three year, floating rate loan agreement that was scheduled to mature on January 18, 2011. The Company used cash to repay the notes. |
15
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
13. | Earnings Per Share |
The Company presents both basic and diluted earnings per share (EPS) amounts. Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted EPS is calculated by dividing net income by the weighted average number of common shares and common equivalent shares outstanding during the reporting period that are calculated using the treasury stock method for stock options. The treasury stock method assumes that the Company uses the proceeds from the exercise of awards to repurchase common stock at the average market price during the period. The assumed proceeds under the treasury stock method include the purchase price that the grantee will pay in the future, compensation cost for future service that the Company has not yet recognized and any windfall tax benefits that would be credited to additional paid-in capital when the award generates a tax deduction. If there would be a shortfall resulting in a charge to additional paid-in capital, such an amount would be a reduction of the proceeds. | ||
The Companys outstanding equity units due 2042 and 6.5% convertible senior notes due 2012 are reflected in diluted earnings per share using the if-converted method. Under this method, if dilutive, the common stock is assumed issued as of the beginning of the reporting period and included in calculating diluted earnings per share. In addition, if dilutive, interest expense, net of tax, related to the outstanding equity units and convertible senior notes is added back to the numerator in calculating diluted earnings per share. | ||
The following table reconciles the numerators and denominators used to calculate basic and diluted earnings per share (in millions): |
Three Months | ||||||||
Ended December 31, | ||||||||
2009 | 2008 | |||||||
Income Available to Common Shareholders |
||||||||
Basic income (loss) available to common shareholders |
$ | 350 | $ | (608 | ) | |||
Interest expense, net of tax |
2 | | ||||||
Diluted income (loss) available to common shareholders |
$ | 352 | $ | (608 | ) | |||
Weighted Average Shares Outstanding |
||||||||
Basic weighted average shares outstanding |
670.6 | 593.5 | ||||||
Effect of dilutive securities: |
||||||||
Stock options |
5.8 | | ||||||
Equity units |
4.5 | | ||||||
Convertible senior notes |
0.1 | | ||||||
Diluted weighted average shares outstanding |
681.0 | 593.5 | ||||||
Antidilutive Securities |
||||||||
Options to purchase common shares |
2.3 | |
For the three months ended December 31, 2008, the total weighted average of potential dilutive shares due to stock options was 1.5 million. However, these options were not included in the computation of diluted net loss per common share for the three months ended December 31, 2008, since to do so would decrease the loss per share. | ||
During each of the three months ended December 31, 2009 and 2008, the Company declared a quarterly dividend of $0.13 per common share. The Company paid all dividends in the month subsequent to the end of each fiscal quarter. |
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Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
14. | Equity Attributable to Johnson Controls, Inc. and Noncontrolling Interests |
In December 2007, the FASB issued guidance changing the accounting and reporting for minority interests, which are recharacterized as noncontrolling interests and classified as a component of equity. In addition, the guidance changes the presentation and accounting for noncontrolling interests, and requires that equity presented in the consolidated financial statements include amounts attributable to Johnson Controls, Inc. shareholders and the noncontrolling interests. This guidance is included in ASC 810, Consolidation, and is effective for the Company October 1, 2009. | ||
The following schedule presents changes in consolidated equity attributable to Johnson Controls, Inc. and the noncontrolling interests (in millions): |
Fiscal 2010 | Fiscal 2009 | |||||||||||||||||||||||
Equity | Equity | Equity | Equity | |||||||||||||||||||||
Attributable to | Attributable to | Attributable to | Attributable to | |||||||||||||||||||||
Johnson | Noncontrolling | Total | Johnson | Noncontrolling | Total | |||||||||||||||||||
Controls, Inc. | Interests | Equity | Controls, Inc. | Interests | Equity | |||||||||||||||||||
Beginning balance, October 1 |
$ | 9,138 | $ | 201 | $ | 9,339 | $ | 9,424 | $ | 236 | $ | 9,660 | ||||||||||||
Total comprehensive income (loss): |
||||||||||||||||||||||||
Net income (loss) |
350 | 16 | 366 | (608 | ) | | (608 | ) | ||||||||||||||||
Foreign currency translation adjustments |
(107 | ) | (1 | ) | (108 | ) | (398 | ) | (5 | ) | (403 | ) | ||||||||||||
Realized and
unrealized gains (losses) on derivatives |
3 | | 3 | (38 | ) | | (38 | ) | ||||||||||||||||
Employee retirement plans |
30 | | 30 | | | | ||||||||||||||||||
Other comprehensive loss |
(74 | ) | (1 | ) | (75 | ) | (436 | ) | (5 | ) | (441 | ) | ||||||||||||
Comprehensive income (loss) |
276 | 15 | 291 | (1,044 | ) | (5 | ) | (1,049 | ) | |||||||||||||||
Other changes in equity: |
||||||||||||||||||||||||
Cash dividends |
||||||||||||||||||||||||
Cash
dividends common stock ($0.13 per share) |
(87 | ) | | (87 | ) | (76 | ) | | (76 | ) | ||||||||||||||
Dividends
attributable to noncontrolling interests |
| (13 | ) | (13 | ) | | (2 | ) | (2 | ) | ||||||||||||||
Other, including options exercised |
26 | | 26 | 9 | | 9 | ||||||||||||||||||
Ending balance, December 31 |
$ | 9,353 | $ | 203 | $ | 9,556 | $ | 8,313 | $ | 229 | $ | 8,542 | ||||||||||||
15. | Derivative Instruments and Hedging Activities |
In March 2008, the FASB issued guidance enhancing required disclosures regarding derivatives and hedging activities, including how an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and affect an entitys financial position, financial performance and cash flows. This guidance is included in ASC 815, Derivatives and Hedging, and was effective for the Company beginning in the second quarter of fiscal 2009 and is applied prospectively. | ||
The Company selectively uses derivative instruments to reduce market risk associated with changes in foreign currency, commodities, stock-based compensation liabilities and interest rates. Under Company policy, the use of derivatives is restricted to those intended for hedging purposes; the use of any derivative instrument for speculative purposes is strictly prohibited. A description of each type of derivative utilized by the Company to manage risk is included in the following paragraphs. In addition, refer to Note 16, Fair Value Measurements, for information related to the fair value measurements and valuation methods utilized by the Company for each derivative type. | ||
The Company has global operations and participates in the foreign exchange markets to minimize its risk of loss from fluctuations in foreign currency exchange rates. The Company primarily uses foreign currency exchange contracts to hedge certain of its foreign exchange rate exposures. The Company hedges 70% to 90% of the nominal amount of each of its known foreign exchange transactional exposures. | ||
The Company has entered into foreign currency denominated debt obligations to selectively hedge portions of its net investment in Japan. The currency effects of the debt obligations are reflected in the accumulated other comprehensive income (AOCI) account within shareholders equity attributable to Johnson Controls, Inc. where they offset gains and losses recorded on the Companys net investment in Japan. As of December 31, 2009, the Company had 18 billion yen of foreign denominated debt outstanding designated as net investment hedges in the Companys net investment in Japan. |
17
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company uses commodity contracts in the financial derivatives market in cases where commodity price risk cannot be naturally offset or hedged through supply base fixed price contracts. Commodity risks are systematically managed pursuant to policy guidelines. As cash flow hedges, the effective portion of the hedge gains or losses due to changes in fair value are initially recorded as a component of AOCI and are subsequently reclassified into earnings when the hedged transactions, typically sales or costs related to sales, occur and affect earnings. Any ineffective portion of the hedge is reflected in the consolidated statement of income. The maturities of the commodity contracts coincide with the expected purchase of the commodities. As of December 31, 2009, the Company had the following outstanding commodity hedge contracts that hedge forecasted purchases: |
Volume Outstanding | ||||||
Commodity | Units | As of December 31, 2009 | ||||
Copper |
Pounds | 9,030,000 | ||||
Lead |
Metric Tons | 6,200 |
In addition, the Company selectively uses equity swaps to reduce market risk associated with certain of its stock-based compensation plans, such as its deferred compensation plans. These equity compensation liabilities increase as the Companys stock price increases and decrease as the Companys stock price decreases. In contrast, the value of the swap agreement moves in the opposite direction of these liabilities, allowing the Company to fix a portion of the liabilities at a stated amount. As of December 31, 2009, the Company had hedged approximately 3.2 million shares of its common stock. | ||
The Company selectively uses interest rate swaps to reduce market risk associated with changes in interest rates for its fixed-rate bonds. As fair value hedges, the interest rate swaps and related debt balances are valued under a market approach using publicized swap curves. Changes in the fair value of the swap and hedged portion of the debt are recorded in the consolidated statement of income. In the fourth quarter of fiscal 2009, the Company entered into three fixed to floating interest rate swaps totaling $700 million to hedge the coupons of its 5.25% bond maturing on January 15, 2011 ($733 million). | ||
The following table presents the location and fair values of derivative instruments and hedging activities included in the Companys condensed consolidated statement of financial position at December 31, 2009 (in millions): |
18
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
December 31, 2009 | ||||||||
Derivatives and Hedging | Derivatives and Hedging | |||||||
Activities Designated as | Activities Not Designated as | |||||||
Hedging Instruments under | Hedging Instruments under | |||||||
ASC 815 | ASC 815 | |||||||
Other current assets |
||||||||
Foreign currency exchange derivatives |
$ | 32 | $ | 31 | ||||
Commodity derivatives |
11 | | ||||||
Other noncurrent assets |
||||||||
Interest rate swaps |
16 | | ||||||
Equity swap |
| 86 | ||||||
Foreign currency exchange derivatives |
1 | 1 | ||||||
Total assets |
$ | 60 | $ | 118 | ||||
Other current liabilities |
||||||||
Foreign currency exchange derivatives |
41 | 24 | ||||||
Long-term debt |
||||||||
Fixed rate debt swapped to floating |
706 | | ||||||
Net investment hedges |
195 | | ||||||
Other noncurrent liabilities |
||||||||
Foreign currency exchange derivatives |
1 | 1 | ||||||
Total liabilities |
$ | 943 | $ | 25 | ||||
The following table presents the location and amount of gains and losses on derivative instruments
and related hedge items included in the Companys consolidated statement of income for the three
months ended December 31, 2009 and gains and losses initially recognized in other comprehensive
income (OCI) net of tax or cumulative translation adjustment (CTA) net of tax in the condensed
consolidated statement of financial position at December 31, 2009 (in millions):
As of December 31, 2009 | For the three months ended December 31, 2009 | For the three months ended December 31, 2009 | ||||||||||||||||||
Derivatives in ASC 815 | Amount of Gain (Loss) | Location of Gain (Loss) | Amount of Gain (Loss) | Location of Gain (Loss) | Amount of Gain (Loss) | |||||||||||||||
Cash Flow Hedging | Recognized in OCI on | Reclassified from AOCI into | Reclassified from AOCI into | Recognized in Income on | Recognized in Income on | |||||||||||||||
Relationships | Derivative (Effective Portion) | Income (Effective Portion) | Income (Effective Portion) | Derivative (Ineffective Portion) | Derivative (Ineffective Portion) | |||||||||||||||
Foreign currency exchange derivatives |
$ | (5 | ) | Cost of sales | $ | (3 | ) | Cost of sales | $ | | ||||||||||
Commodity derivatives |
7 | Cost of sales | (1 | ) | Cost of sales | | ||||||||||||||
Total |
$ | 2 | $ | (4 | ) | $ | | |||||||||||||
As of December 31, 2009 | ||||
Amount of Gain (Loss) | ||||
Hedging Activities in ASC 815 Net Investment | Recognized in CTA on | |||
Hedging Relationships | Derivative (Effective Portion) | |||
Net investment hedges |
$ | 3 | ||
Total |
$ | 3 | ||
For the three months ended December 31, 2009, no gains or losses were reclassified from AOCI into income for the Companys net investment hedges. |
19
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
For the three months ended December 31, 2009 | ||||||||
Amount of Gain (Loss) | ||||||||
Derivatives Not Designated as Hedging | Location of Gain (Loss) Recognized in Income | Recognized in Income on | ||||||
Instruments under ASC 815 | on Derivative | Derivative | ||||||
Foreign currency exchange derivatives |
Cost of sales | $ | 23 | |||||
Foreign currency exchange derivatives |
Net financing charges | (3 | ) | |||||
Equity swap |
Selling, general and administrative expenses | 5 | ||||||
Total |
$ | 25 | ||||||
16. | Fair Value Measurements |
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows: |
Level 1: Observable inputs such as quoted prices in active markets; | |||
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and | |||
Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions. |
ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. |
Recurring Fair Value Measurements | ||
The following table presents the Companys fair value hierarchy for those assets and liabilities measured at fair value on a quarterly basis as of December 31, 2009 and 2008 (in millions): |
Fair Value Measurements Using: | ||||||||||||||||
Quoted Prices in Active | Significant Other Observable |
Significant Unobservable | ||||||||||||||
Total as of | Markets | Inputs | Inputs | |||||||||||||
December 31, 2009 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Foreign currency exchange derivatives |
$ | 65 | $ | 65 | $ | | $ | | ||||||||
Commodity derivatives |
11 | | 11 | | ||||||||||||
Interest rate swaps |
16 | | 16 | | ||||||||||||
Equity swap |
86 | 86 | | | ||||||||||||
Total |
$ | 178 | $ | 151 | $ | 27 | $ | | ||||||||
Liabilities |
||||||||||||||||
Foreign currency exchange derivatives |
$ | 67 | $ | 67 | $ | | $ | | ||||||||
Fixed rate debt swapped to floating |
706 | | 706 | | ||||||||||||
Foreign currency denominated debt |
195 | 195 | | | ||||||||||||
Total |
$ | 968 | $ | 262 | $ | 706 | $ | | ||||||||
20
Table of Contents
Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
Fair Value Measurements Using: | ||||||||||||||||
Quoted Prices in Active | Significant Other | Significant Unobservable | ||||||||||||||
Total as of | Markets | Observable Inputs | Inputs | |||||||||||||
December 31, 2008 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Cross-currency interest rate swap |
$ | 31 | $ | | $ | 31 | $ | | ||||||||
Equity swap |
1 | 1 | | | ||||||||||||
Total |
$ | 32 | $ | 1 | $ | 31 | $ | | ||||||||
Liabilities |
||||||||||||||||
Foreign currency exchange derivatives |
$ | 19 | $ | 19 | $ | | $ | | ||||||||
Commodity derivatives |
84 | | 84 | | ||||||||||||
Interest rate swaps and related debt |
495 | | 495 | | ||||||||||||
Foreign currency denominated debt |
1,165 | 1,165 | | | ||||||||||||
Total |
$ | 1,763 | $ | 1,184 | $ | 579 | $ | | ||||||||
Valuation Methods
Foreign currency exchange derivatives The Company selectively hedges anticipated transactions
that are subject to foreign exchange rate risk primarily using foreign currency exchange hedge
contracts. The foreign currency exchange derivatives are valued under a market approach using
publicized spot and forward prices. As cash flow hedges, the effective portion of the hedge
gains or losses due to changes in fair value are initially recorded as a component of
accumulated other comprehensive income and are subsequently reclassified into earnings when the
hedged transactions occur and affect earnings. Any ineffective portion of the hedge is
reflected in the consolidated statement of income. These contracts are highly effective in
hedging the variability in future cash flows attributable to changes in currency exchange rates
at December 31, 2009 and 2008.
Commodity derivatives The Company selectively hedges anticipated transactions that are
subject to commodity price risk, primarily using commodity hedge contracts, to minimize overall
price risk associated with the Companys purchases of lead, copper and polypropylene. The
commodity derivatives are valued under a market approach using publicized prices, where
available, or dealer quotes. As cash flow hedges, the effective portion of the hedge gains or
losses due to changes in fair value are initially recorded as a component of accumulated other
comprehensive income and are subsequently reclassified into earnings when the hedged
transactions, typically sales or cost related to sales, occur and affect earnings. Any
ineffective portion of the hedge is reflected in the consolidated statement of income. These
contracts are highly effective in hedging the variability in future cash flows attributable to
changes in commodity price changes at December 31, 2009 and 2008.
Interest rate swaps and related debt The Company selectively uses interest rate swaps to
reduce market risk associated with changes in interest rates for its fixed-rate bonds. As fair
value hedges, the interest rate swaps and related debt balances are valued under a market
approach using publicized swap curves. Changes in the fair value of the swap and hedged portion
of the debt are recorded in the consolidated statement of income. At December 31, 2009, the
Company has three fixed to floating interest rate swaps totaling $700 million to hedge the
coupons of its 5.25% bond maturing on January 15, 2011 ($733 million). At December 31, 2008, the Company
had two fixed to floating interest rate swaps totaling $450 million to hedge the coupons of its
7.125% bond maturing on July 15, 2017 ($150 million) and 4.875% bond maturing on September 15,
2013 ($300 million). The Company settled interest rate swaps hedging $450 million of debt in
the second quarter of fiscal 2009.
Equity swap The Company selectively uses equity swaps to reduce market risk associated with
certain of its stock-based compensation plans, such as its deferred compensation plans. The
equity swaps are valued under a market approach as the fair value of the swaps is equal to the
Companys stock price at the reporting period date. Changes in fair value on the equity swaps
are reflected in the consolidated statement of income within selling, general and
administrative expenses.
Foreign currency denominated debt The Company has entered into certain foreign currency
denominated debt obligations to selectively hedge portions of its net investment in Japan. The
currency effects of the debt obligations are reflected in the foreign currency translation
adjustments component of accumulated other
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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
comprehensive income where they offset gains and
losses recorded on the Companys net investment in Japan. The Company also has certain foreign
currency denominated debt obligations not designated as net investment hedges, and the currency
effects of the related debt obligations are reflected in the consolidated statement of income.
The Companys foreign denominated debt obligations are valued under a market approach using
publicized spot prices.
Cross-currency interest rate swap The Company selectively uses cross-currency interest rate
swaps to hedge the foreign currency rate risk associated with certain of its foreign currency
denominated debt obligations. The cross-currency interest rate swap is valued using market
assumptions. The currency effects of the swap and related debt obligation are reflected in the
consolidated statement of income and the change in value of the swap and debt obligation
offset. The Company settled its cross-currency interest rate swap in the second quarter of
fiscal 2009.
The fair values of cash and cash equivalents, accounts receivable, short-term debt and
accounts payable approximate their carrying values. The fair value of long-term debt, which
was $3.2 billion and $3.4 billion at December 31, 2009 and 2008, respectively, was determined
using market quotes.
17. | Impairment of Long-Lived Assets |
The Company reviews long-lived assets for impairment whenever events or changes in
circumstances indicate that the assets carrying amount may not be recoverable. The Company
conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, Impairment
or Disposal of Long-Lived Assets. ASC 360-10-15 requires the Company to group assets and
liabilities at the lowest level for which identifiable cash flows are largely independent of
the cash flows of other assets and liabilities and evaluate the asset group against the sum of
the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying
amount of the asset group is recoverable, an impairment charge is measured as the amount by
which the carrying amount of the asset group exceeds its fair value based on discounted cash
flow analysis or appraisals. At December 31, 2009, the Company concluded it did not have any
triggering events requiring assessment of impairment of its long-lived assets.
At December 31, 2008, in conjunction with the preparation of its financial statements, the
Company concluded it had a triggering event requiring assessment of impairment of its
long-lived assets due to the significant declines in North American and European automotive
sales volumes. As a result, the Company reviewed its long-lived assets for impairment and
recorded a $110 million impairment charge within cost of sales in the first quarter of fiscal 2009, of which $77 million related to the North America automotive
experience segment and $33 million related to the Europe automotive experience segment.
The Company reviews its equity investments for impairment whenever there is a loss in value of
an investment which is other than a temporary decline. The Company conducts its equity
investment impairment analyses in accordance with ASC 323, Investments-Equity Method and Joint
Ventures. ASC 323 requires the Company to record an impairment charge for a decrease in value
of an investment when the decline in the investment is considered to be other than temporary.
At December 31, 2008, in conjunction with the preparation of its financial statements, the
Company concluded it had a triggering event requiring assessment of impairment of its equity
investment in a 48%-owned joint venture with U.S. Airconditioning Distributors, Inc. (U.S. Air)
due to the significant decline in North American residential housing construction starts, which
had significantly impacted the financial results of the equity investment. The Company reviewed
its equity investment in U.S. Air for impairment and as a result, recorded a $152 million
impairment charge within equity income (loss) for the building efficiency North America unitary
products segment in the first quarter of fiscal 2009. The U.S. Air investment balance included
in the condensed consolidated statement of financial position at December 31, 2009 was $57
million. The Company does not anticipate future impairment of this investment as, based on its
current forecasts, a further decline in value that is other than temporary is not considered
reasonably likely to occur.
18. | Segment Information |
ASC 280, Segment Reporting, establishes the standards for reporting information about
segments in financial statements. In applying the criteria set forth in ASC 280, the Company
has determined that it has ten
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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
reportable segments for financial reporting purposes. Certain
segments are aggregated or combined based on materiality within building efficiency rest of
world and power solutions in accordance with the standard. The Companys ten reportable
segments are presented in the context of its three primary businesses building efficiency,
automotive experience and power solutions.
Building efficiency
Building efficiency designs, produces, markets and installs HVAC and control systems that
monitor, automate and integrate critical building segment equipment and conditions including
HVAC, fire-safety and security in commercial buildings and in various industrial applications.
| North America systems designs, produces, markets and installs mechanical equipment that provides heating and cooling in North American non-residential buildings and industrial applications as well as control systems that integrate the operation of this equipment with other critical building systems. | ||
| North America service provides technical services including inspection, scheduled maintenance, repair and replacement of mechanical and control systems in North America, as well as the retrofit and service components of performance contracts and other solutions. | ||
| North America unitary products designs and produces heating and air conditioning solutions for residential and light commercial applications and markets products to the replacement and new construction markets. | ||
| Global workplace solutions provides on-site staff for complete real estate services, facility operation and management to improve the comfort, productivity, energy efficiency and cost effectiveness of building systems around the globe. | ||
| Europe provides HVAC and refrigeration systems and technical services to the European marketplace. | ||
| Rest of world provides HVAC and refrigeration systems and technical services to markets in Asia, the Middle East and Latin America. |
Automotive experience
Automotive experience designs and manufactures interior systems and products for passenger
cars and light trucks, including vans, pick-up trucks and sport utility/crossover vehicles in
North America, Europe and Asia. Automotive experience systems and products include complete
seating systems and components; cockpit systems, including instrument panels and clusters,
information displays and body controllers; overhead systems, including headliners and
electronic convenience features; floor consoles; and door systems.
Power solutions
Power solutions services both automotive original equipment manufacturers and the battery
aftermarket by providing advanced battery technology, coupled with systems engineering,
marketing and service expertise.
Management evaluates the performance of the segments based primarily on segment income, which
represents income from continuing operations before income taxes and noncontrolling interests
excluding net financing charges and restructuring costs. General Corporate and other overhead
expenses are allocated to business segments in determining segment income. Financial
information relating to the Companys reportable segments is as follows (in millions):
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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
Net Sales | ||||||||
Three Months | ||||||||
Ended December 31, | ||||||||
2009 | 2008 | |||||||
Building efficiency |
||||||||
North America systems |
$ | 482 | $ | 537 | ||||
North America service |
490 | 532 | ||||||
North America unitary products |
163 | 133 | ||||||
Global workplace solutions |
819 | 728 | ||||||
Europe |
515 | 572 | ||||||
Rest of world |
549 | 585 | ||||||
3,018 | 3,087 | |||||||
Automotive experience |
||||||||
North America |
1,596 | 1,403 | ||||||
Europe |
2,114 | 1,439 | ||||||
Asia |
393 | 289 | ||||||
4,103 | 3,131 | |||||||
Power solutions |
1,287 | 1,118 | ||||||
Total net sales |
$ | 8,408 | $ | 7,336 | ||||
Segment Income | ||||||||
Three Months | ||||||||
Ended December 31, | ||||||||
2009 | 2008 | |||||||
Building efficiency |
||||||||
North America systems |
$ | 44 | $ | 55 | ||||
North America service |
15 | 34 | ||||||
North America unitary products |
| (176 | ) | |||||
Global workplace solutions |
5 | 6 | ||||||
Europe |
(6 | ) | 12 | |||||
Rest of world |
46 | 48 | ||||||
104 | (21 | ) | ||||||
Automotive experience |
||||||||
North America |
86 | (170 | ) | |||||
Europe |
11 | (147 | ) | |||||
Asia |
24 | (12 | ) | |||||
121 | (329 | ) | ||||||
Power solutions |
181 | 40 | ||||||
Total segment income (loss) |
$ | 406 | $ | (310 | ) | |||
Net financing charges |
(35 | ) | (56 | ) | ||||
Income (loss) before income taxes |
$ | 371 | $ | (366 | ) | |||
19. | Commitments and Contingencies |
The Company accrues for potential environmental losses in a manner consistent with U.S. GAAP;
that is, when it is probable a loss has been incurred and the amount of the loss is reasonably
estimable. The Company reviews the status of its environmental sites on a quarterly basis and
adjusts its reserves accordingly. Such potential liabilities accrued by the Company do not take
into consideration possible recoveries of future insurance proceeds. They do, however, take
into account the likely share other parties will bear at remediation sites. It is difficult to
estimate the Companys ultimate level of liability at many remediation sites due to the large
number of other parties that may be involved, the complexity of determining the relative
liability among those parties, the uncertainty as to the nature and scope of the investigations
and remediation to be conducted, the uncertainty in the application of law and risk assessment,
the various choices and costs associated with
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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
diverse technologies that may be used in
corrective actions at the sites, and the often quite lengthy periods over which eventual
remediation may occur. Nevertheless, the Company has no reason to believe at the present time
that any claims, penalties or costs in connection with known environmental matters will have a
material adverse effect on the Companys financial position, results of operations or cash
flows.
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 managements opinion that none of these
will have a material adverse effect on the Companys financial position, results of operations
or cash flows. Costs related to such matters were not material to the periods presented.
20. | Subsequent Events |
ASC 855, Subsequent Events, requires disclosure of the date through which subsequent events
have been evaluated, as well as whether the date is the date the financial statements were
issued or the date the financial statements were available to be issued. The Company has
evaluated subsequent events through February 3, 2010, the date the financial statements were
issued. No significant subsequent events have occurred through this date requiring adjustment
to the financial statements or disclosures.
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Table of Contents
PricewaterhouseCoopers LLP | ||
100 E. Wisconsin Ave., Suite 1800 | ||
Milwaukee WI 53202 | ||
Telephone (414) 212 1600 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
of Johnson Controls, Inc.
of Johnson Controls, Inc.
We have reviewed the accompanying condensed consolidated statements of financial position of
Johnson Controls, Inc. and its subsidiaries (the Company) as of December 31, 2009 and 2008, and
the related consolidated statements of income and the condensed consolidated statements of cash
flows for the three-month periods ended December 31, 2009 and 2008. These interim financial
statements are the responsibility of the Companys management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight
Board (United States). A review of interim financial information consists principally of applying
analytical procedures and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance with the standards
of the Public Company Accounting Oversight Board (United States), the objective of which is the
expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the
accompanying condensed consolidated interim financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated statement of financial position as of September
30, 2009, and the related consolidated statements of income, shareholders equity, and cash flows
for the year then ended (not presented herein), and in our report dated November 24, 2009 we
expressed an unqualified opinion on those consolidated financial statements. An explanatory
paragraph was included in our report for the adoption of guidance included in Accounting Standards
Codification (ASC) 740, Income Taxes, prescribing how a company should recognize, measure,
present, and discloses uncertain tax positions. In our opinion, the information set forth in the
accompanying condensed consolidated statement of financial position as of September 30, 2009, is
fairly stated in all material respects in relation to the consolidated statement of financial
position from which it has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 3, 2010
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 3, 2010
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statements for Forward-Looking Information
Unless otherwise indicated, references to Johnson Controls, the Company, we, our and us
in this Quarterly Report on Form 10-Q refer to Johnson Controls, Inc. and its consolidated
subsidiaries.
Certain statements in this report, other than purely historical information, including estimates,
projections, statements relating to our business plans, objectives and expected operating results,
and the assumptions upon which those statements are based, are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements generally are identified by the words believe, project, expect, anticipate,
estimate, forecast, outlook, intend, strategy, plan, may, should, will, would,
will be, will continue, will likely result, guidance or the negative thereof or variations
thereon or similar terminology generally intended to identify forward-looking statements.
Forward-looking statements are based on current expectations and assumptions that are subject to
risks and uncertainties which may cause actual results to differ materially from the
forward-looking statements. A detailed discussion of risks and uncertainties that could cause
actual results and events to differ materially from such forward-looking statements is included in
the section entitled Risk Factors of our Annual Report on Form 10-K for the year ended September
30, 2009. We undertake no obligation to update or revise publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
Overview
Johnson Controls brings ingenuity to the places where people live, work and travel. By integrating
technologies, products and services, we create smart environments that redefine the relationships
between people and their surroundings. We strive to create a more comfortable, safe and sustainable
world through our products and services to millions of vehicles, homes and commercial buildings.
Johnson Controls provides innovative automotive interiors that help make driving more comfortable,
safe and enjoyable. For buildings, we offer products and services that optimize energy use and
improve comfort and security. We also provide batteries for automobiles and hybrid electric
vehicles, along with related systems engineering, marketing and service expertise.
Johnson Controls was originally incorporated in the state of Wisconsin in 1885 as Johnson Electric
Service Company to manufacture, install and service automatic temperature regulation systems for
buildings. The Company was renamed to Johnson Controls, Inc. in 1974. In 1978, we acquired
Globe-Union, Inc., a Wisconsin-based manufacturer of automotive batteries for both the replacement
and original equipment markets. We entered the automotive seating industry in 1985 with the
acquisition of Michigan-based Hoover Universal, Inc.
Our building efficiency business is a global market leader in designing, producing, marketing and
installing integrated heating, ventilating and air conditioning (HVAC) systems, building management
systems, controls, security and mechanical equipment. In addition, the building efficiency business
provides technical services, energy management consulting and operations of entire real estate
portfolios for the non-residential buildings market. We also provide residential air conditioning
and heating systems.
Our automotive experience business is one of the worlds largest automotive suppliers, providing
innovative interior systems through our design and engineering expertise. Our technologies extend
into virtually every area of the interior including seating and overhead systems, door systems,
floor consoles, instrument panels, cockpits and integrated electronics. Customers include most of
the worlds major automakers.
Our power solutions business is a leading global supplier of lead-acid automotive batteries for
virtually every type of passenger car, light truck and utility vehicle. We serve both automotive
original equipment manufacturers and the general vehicle battery aftermarket. We offer Absorbent
Glass Mat (AGM), nickel-metal-hydride and lithium-ion battery technologies to power hybrid
vehicles.
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The following information should be read in conjunction with the September 30, 2009 consolidated
financial statements and notes thereto, along with managements discussion and analysis of
financial condition and results of operations included in the Companys 2009 Annual Report on Form
10-K. References in the following discussion and analysis to Three Months refer to the three months
ended December 31, 2009, compared to the three months ended December 31, 2008.
Outlook
On January 22, 2010, the Company updated its fiscal 2010 guidance previously issued on October 13,
2009. The Company expects fiscal 2010 net sales to increase to $33 billion (compared to previously
issued guidance of $31 billion), which would represent a 16% increase from prior year net sales,
based on anticipated higher vehicle production in North America, increased power solutions
aftermarket volumes and year over year growth in building efficiency later in fiscal 2010. Building
efficiency segment margins are expected to be 5.6% 5.8%, consistent with previously issued
guidance. Automotive experience segment margins are expected to increase to 2.0% 2.2%, and power
solutions segment margins are expected to increase to 11.8% 12.0%. Earnings are expected to
increase to approximately $1.70 $1.75 per diluted share (compared to previously issued guidance
of $1.35 $1.45 per diluted share), which is higher than fiscal 2009, primarily based on
profitable conversion of increased net sales.
Liquidity and Capital Resources
The Company believes its capital resources and liquidity position at December 31, 2009, are
adequate to meet projected needs. The Company believes requirements for working capital, capital
expenditures, dividends, minimum pension contributions, debt maturities and any potential
acquisitions in fiscal 2010 will continue to be funded from operations, supplemented by short- and
long-term borrowings, if required. The Company currently manages its short-term debt position in
the U.S. and euro commercial paper markets and bank loan markets. The Company continues to adjust
its commercial paper maturities and issuance levels given market reactions to industry events and
changes in the Companys credit rating. In the event the Company is unable to issue commercial
paper, it would have the ability to draw on its $2.05 billion revolving credit facility, which
extends until December 2011. The Company does not have any significant debt maturities until fiscal
2011. As such, the Company believes it has sufficient financial resources to fund operations and
meet its obligations for the foreseeable future.
The Companys debt financial covenants require a minimum consolidated shareholders equity
attributable to Johnson Controls, Inc. of at least $1.31 billion at all times and allow a maximum
aggregated amount of 10% of consolidated shareholders equity attributable to Johnson Controls,
Inc. for liens and pledges. For purposes of calculating the Companys covenants, consolidated
shareholders equity attributable to Johnson Controls, Inc. is calculated without giving effect to
(i) the application of Accounting Standards Codification (ASC) 715-60, Defined Benefit Plans -
Other Postretirement, or (ii) the cumulative foreign currency translation adjustment. As of
December 31, 2009, consolidated shareholders equity attributable to Johnson Controls, Inc. as
defined per the Companys debt financial covenants was $8.8 billion and there were no outstanding
amounts for liens and pledges. The Company expects to remain in compliance with all covenants and
other requirements set forth in its credit agreements and indentures for the foreseeable future.
None of the Companys debt agreements limit access to stated borrowing levels or require
accelerated repayment in the event of a decrease in the Companys credit rating.
The key financial assumptions used in calculating the pension liability are determined annually, or
whenever plan assets and liabilities are re-measured as required under accounting principles
generally accepted in the U.S., including the expected rate of return on our plan assets. The
Companys most recent actuarial valuation utilized an expected rate of return of 8.5% and 6.0% for
U.S. and non-U.S. plans, respectively. Any differences between actual results and the expected
long-term asset returns will be reflected in other comprehensive income and amortized to pension
expense in future years. The Company expects to contribute approximately $245 million in cash to
its defined benefit pension plans in fiscal 2010.
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Segment Analysis
Management evaluates the performance of the Companys business units based primarily on segment
income, which is defined as income from continuing operations before income taxes and noncontrolling
interests excluding net financing charges and restructuring costs.
Summary
Three Months Ended December 31, |
||||||||||||
(in millions) | 2009 | 2008 | Change | |||||||||
Net sales |
$ | 8,408 | $ | 7,336 | 15 | % | ||||||
Segment income |
406 | (310 | ) | * |
* | Measure not meaningful |
| The $1.1 billion increase in consolidated net sales was primarily due to higher sales in the automotive experience business ($767 million) as a result of increased industry production levels by our major original equipment manufacturers (OEMs), the favorable impact of foreign currency translation ($446 million), higher sales volumes in the power solutions business ($99 million) and higher global workplace solutions and unitary products demand in the building efficiency business ($68 million), partially offset by lower sales volumes in the other building efficiency businesses ($308 million). | ||
| The $716 million increase in segment income was primarily due to higher volumes in the automotive experience and power solutions businesses, prior year impairment charges recorded on an equity investment in the building efficiency North America unitary products segment ($152 million), prior year fixed asset impairment charges recorded in the automotive experience North America and Europe segments ($77 million and $33 million, respectively) and the favorable effects of foreign currency translation ($13 million), partially offset by lower overall volumes in the building efficiency businesses. |
Building Efficiency
Net Sales | Segment Income | |||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
(in millions) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
North America systems |
$ | 482 | $ | 537 | -10 | % | $ | 44 | $ | 55 | -20 | % | ||||||||||||
North America service |
490 | 532 | -8 | % | 15 | 34 | -56 | % | ||||||||||||||||
North America unitary products |
163 | 133 | 23 | % | | (176 | ) | * | ||||||||||||||||
Global workplace solutions |
819 | 728 | 13 | % | 5 | 6 | -17 | % | ||||||||||||||||
Europe |
515 | 572 | -10 | % | (6 | ) | 12 | * | ||||||||||||||||
Rest of world |
549 | 585 | -6 | % | 46 | 48 | -4 | % | ||||||||||||||||
$ | 3,018 | $ | 3,087 | -2 | % | $ | 104 | $ | (21 | ) | * | |||||||||||||
* | Measure not meaningful. |
Net Sales:
| The decrease in North America systems was primarily due to lower volumes of control systems and equipment in the commercial construction and replacement markets ($60 million) partially offset by the favorable impact from foreign currency translation ($5 million). | ||
| The decrease in North America service was primarily due to lower truck-based business ($47 million) partially offset by the favorable impact of foreign currency translation ($5 million). | ||
| The increase in North America unitary products was primarily due to increases in the U.S. residential replacement market ($28 million) and the favorable impact of foreign currency translation ($2 million). |
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| The increase in global workplace solutions was primarily due to the favorable impact of foreign currency translation ($51 million) and the impact of increased demand from existing and new customers ($40 million). | ||
| The decrease in Europe was primarily due to lower volumes across the region ($135 million) partially offset by the favorable impact of foreign currency translation ($78 million). | ||
| The decrease in rest of world was primarily due to volume decreases in Latin America ($34 million), Asia ($22 million) and Middle East ($10 million), partially offset by the favorable impact of foreign currency translation ($30 million). |
Segment Income:
| The decrease in North America systems was primarily due to lower volumes ($11 million) partially offset by the favorable impact of foreign currency translation ($1 million). | ||
| The decrease in North America service was primarily due to lower volumes in truck-based services ($12 million) and information technology implementation costs. | ||
| The increase in North America unitary products was primarily due to a prior year impairment charge recorded on an equity investment ($152 million), favorable volumes and margin rates ($15 million) and lower selling, general, and administrative expenses ($7 million). | ||
| The decrease in global workplace solutions was primarily due to higher selling, general, and administrative expenses ($3 million) partially offset by the favorable impact of foreign currency translation ($1 million). | ||
| The decrease in Europe was primarily due to lower sales volumes ($30 million) partially offset by lower selling, general and administrative expenses associated with new business wins ($11 million) and the favorable impact of foreign currency translation ($4 million). | ||
| The decrease in rest of world was primarily due to lower sales volumes ($15 million) partially offset by favorable margin rates ($13 million). |
Automotive Experience
Net Sales | Segment Income | |||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
(in millions) | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
North America |
$ | 1,596 | $ | 1,403 | 14 | % | $ | 86 | $ | (170 | ) | * | ||||||||||||
Europe |
2,114 | 1,439 | 47 | % | 11 | (147 | ) | * | ||||||||||||||||
Asia |
393 | 289 | 36 | % | 24 | (12 | ) | * | ||||||||||||||||
$ | 4,103 | $ | 3,131 | 31 | % | $ | 121 | $ | (329 | ) | * | |||||||||||||
* | Measure not meaningful. |
Net Sales:
| The increase in North America was primarily due to higher industry production volumes by all of the Companys major OEM customers. | ||
| The increase in Europe was primarily due to higher production volumes and new customer awards ($504 million) and the favorable impact of foreign currency translation ($171 million). | ||
| The increase in Asia was primarily due to higher production volumes in Japan, Korea and China ($70 million) and the favorable impact of foreign currency translation ($34 million). |
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Segment Income:
| The increase in North America was primarily due to a prior year impairment charge on fixed assets ($77 million), higher industry production volumes ($43 million), favorable purchasing and commercial costs ($52 million), favorable operating costs ($71 million) and higher equity income ($6 million). |
| The increase in Europe was primarily due to higher production volumes ($79 million), favorable purchasing costs ($35 million), a prior year impairment charge on fixed assets ($33 million) and the favorable impact of foreign currency translation ($5 million). |
| The increase in Asia was primarily due to higher equity income at our joint ventures mainly in China ($25 million) and higher production volumes ($11 million). |
Power Solutions
Three Months Ended | ||||||||||||
December 31, | ||||||||||||
(in millions) | 2009 | 2008 | Change | |||||||||
Net sales |
$ | 1,287 | $ | 1,118 | 15 | % | ||||||
Segment income |
181 | 40 | * |
* | Measure not meaningful. |
| Net sales increased primarily due to higher sales volumes ($105 million), the favorable impact of foreign currency translation ($70 million) and the impact of higher lead costs on pricing ($6 million), partially offset by unfavorable price/product mix ($12 million). |
| Segment income increased primarily due to higher sales volumes ($54 million), the favorable impact of foreign currency translation ($2 million) and favorable net lead and other commodity costs net of pricing ($90 million), which includes a prior year $33 million out of period adjustment as discussed in Note 1, Financial Statements, to the financial statements. Partially offsetting these factors were higher selling, general and administrative costs ($7 million). |
Restructuring Costs
To better align the Companys cost structure with global automotive market conditions, the Company
committed to a restructuring plan (2009 Plan) in the second quarter of fiscal 2009 and recorded a
$230 million restructuring charge. The restructuring charge relates to cost reduction initiatives
in the Companys automotive experience, building efficiency and power solutions businesses and
includes workforce reductions and plant consolidations. The Company expects to substantially
complete the 2009 Plan by the end of 2010. The automotive-related restructuring actions target
excess manufacturing capacity resulting from lower industry production in the European, North
American and Japanese automotive markets. The restructuring actions in building efficiency are
primarily in Europe where
the Company is centralizing certain functions and rebalancing its resources to target the
geographic markets with the greatest potential growth. Power solutions actions are focused on
optimizing its manufacturing capacity as a result of lower overall demand for original equipment
batteries resulting from lower vehicle production levels.
Since the announcement of the 2009 Plan in March 2009, the Company has experienced lower employee
severance and termination benefit cash payouts than previously calculated for automotive
experience Europe of approximately $43 million, of which $15 million was identified in the
quarter ended December 31, 2009, due to favorable severance negotiations and the decision to not
close one of the previously planned plants in response to customer demand. In response to the
depressed automotive industry in Europe, the Company has committed to the consolidation of one
additional plant in Europe since the announcement of its 2009 Plan. The underspend of the initial
2009 Plan reserves will be utilized for this plant consolidation which is expected to occur in
late fiscal 2010 and for additional costs to be incurred as part of power solutions and automotive
experience Europes original cost reduction initiatives. The planned workforce reductions
disclosed for the 2009 Plan have been updated for the Companys revised actions.
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The 2009 Plan includes workforce reductions of approximately 6,300 employees (2,900 for automotive
experience North America, 1,700 for automotive experience Europe, 600 for automotive
experience Asia, 200 for building efficiency North America, 400 for building efficiency Europe, 200 for building efficiency rest of
world, and 300 for power solutions). Restructuring charges associated with employee severance and
termination benefits are paid over the severance period granted to each employee and on a lump sum
basis when required in accordance with individual severance agreements. As of December 31, 2009,
approximately 5,000 of the employees have been separated from the Company pursuant to the 2009
Plan. In addition, the 2009 Plan includes 9 plant closures (3 for automotive experience North
America, 1 for automotive experience Europe, 3 for automotive experience Asia, 1 for building
efficiency rest of world, and 1 for power solutions). As of December 31, 2009, 6 of the 9 plants
have been closed. The restructuring charge for the impairment of long-lived assets associated with
the plant closures was determined using fair value based on a discounted cash flow analysis or
appraisals.
To better align the Companys resources with its growth strategies while reducing the cost
structure of its global operations, the Company committed to a restructuring plan (2008 Plan) in
the fourth quarter of fiscal 2008 and recorded a $495 million restructuring charge. The
restructuring charge relates to cost reduction initiatives in its automotive experience, building
efficiency and power solutions businesses and includes workforce reductions and plant
consolidations. The Company expects to substantially complete the 2008 Plan in 2010. The
automotive-related restructuring is in response to the fundamentals of the European and North
American automotive markets. The actions target reductions in the Companys cost base by
decreasing excess manufacturing capacity due to lower industry production and the continued
movement of vehicle production to low-cost countries, especially Europe. The restructuring actions
in building efficiency are primarily in Europe where the Company is centralizing certain functions
and rebalancing its resources to target the geographic markets with the greatest potential growth.
Power solutions actions are focused on optimizing its regional manufacturing capacity.
Since the announcement of the 2008 Plan in September 2008, the Company has experienced lower
employee severance and termination benefit cash payouts than previously calculated for building
efficiency Europe and automotive experience Europe of approximately $63 million, all of which
was
identified in fiscal 2009, due to favorable severance negotiations, individuals transferred to
open positions within the Company and changes in cost reduction actions from plant consolidation
to downsizing of operations. The underspend of the initial 2008 Plan will be utilized for similar
restructuring actions to be performed during fiscal 2010. The underspend incurred by building
efficiency Europe will be utilized for workforce reductions and plant consolidations in building
efficiency Europe. The underspend incurred by automotive experience Europe will be utilized
for one additional plant consolidation for automotive experience Europe. The planned workforce
reductions disclosed for the 2008 Plan have been updated for the Companys revised actions.
The 2008 Plan includes workforce reductions of approximately 10,700 employees (3,700 for
automotive experience North America, 3,800 for automotive experience Europe, 400 for building
efficiency North America, 1,500 for building efficiency Europe, 800 for building efficiency
rest of world and 500 for power solutions). Restructuring charges associated with employee
severance and termination benefits are paid over the severance period granted to each employee and
on a lump sum basis when required in accordance with individual severance agreements. As of
December 31, 2009, approximately 9,000 of the employees have been separated from the Company
pursuant to the 2008 Plan. In addition, the 2008 Plan includes 22 plant closures (9 for
automotive experience North America, 10 for automotive experience Europe, 1 for building
efficiency North America, and 2 for power solutions). As of December 31, 2009, 13 of the 22
plants have been closed. The restructuring charge for the impairment of long-lived assets
associated with the plant closures was determined using fair value based on a discounted cash flow
analysis or appraisals.
Net Financing Charges
Three Months Ended | ||||||||||||
December 31, | ||||||||||||
(in millions) | 2009 | 2008 | Change | |||||||||
Net financing charges |
$ | 35 | $ | 56 | -38 | % |
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| The decrease in net financing charges is primarily due to lower debt levels and lower interest rates in the current quarter. |
Provision for Income Taxes
Three Months Ended | ||||||||
December 31, | ||||||||
(in millions) | 2009 | 2008 | ||||||
Tax provision |
$ | 5 | $ | 242 | ||||
Effective tax rate |
1.3 | % | -66.1 | % | ||||
Estimated annual base effective tax rate |
18.0 | % | 24.0 | % |
| In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the annual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter. |
| In the current fiscal quarter, the Companys estimated annual effective income tax rate for continuing operations decreased from 24% in the prior year to 18%, primarily due to change in geographic split of income and global tax planning initiatives. |
| In the first quarter of fiscal 2010, the Company determined that it is more likely than not that a portion of the deferred tax assets in Brazil would be utilized. Therefore, the Company released $69 million of valuation allowances. This is comprised of a $93 million decrease in income tax expense offset by a $24 million reduction in cumulative translation adjustments. |
| As a result of certain recent events related to prior year tax planning initiatives, during the first quarter of fiscal 2010, the company increased the reserve for uncertain tax positions by $31 million, including $26 million of interest and penalties, which impacts the effective tax rate. |
Income Attributable to Noncontrolling Interests
Three Months Ended | ||||||||||||
December 31, | ||||||||||||
(in millions) | 2009 | 2008 | Change | |||||||||
Income attributable to noncontrolling interests |
$ | 16 | $ | | * |
* | Measure not meaningful |
| The increase in income attributable to noncontrolling interests was primarily due to earnings at certain automotive experience joint ventures in North America. |
Net Income Attributable to Johnson Controls, Inc.
Three Months Ended | ||||||||||||
December 31, | ||||||||||||
(in millions) | 2009 | 2008 | Change | |||||||||
Net income (loss)
attributable to Johnson
Controls, Inc. |
$ | 350 | $ | (608 | ) | * |
* | Measure not meaningful |
| The increase in net income was primarily due to higher volumes in the automotive experience and power solutions businesses, prior year impairment charges recorded on an equity investment in the building efficiency North America unitary products segment, prior year fixed asset impairment charges recorded in the automotive experience North America and Europe segments, lower net financing charges, a decrease in the provision for income taxes and the favorable effects of foreign currency translation, partially offset by lower overall volumes in the building efficiency businesses and higher income attributable to noncontrolling interests. |
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Backlog
Building efficiencys backlog relates to its control systems and service activity. At December 31,
2009, the unearned backlog was $4.3 billion, or an 8% decrease compared to December 31, 2008.
Excluding the positive impact of foreign currency, the backlog was lower by 10% at December 31,
2009 compared to December 31, 2008. The North America backlog was comparable to prior year levels,
while there was a decline in Europe and the Middle East.
Financial Condition
Working Capital
December 31, | September 30, | December 31, | ||||||||||||||||||
(in millions) | 2009 | 2009 | Change | 2008 | Change | |||||||||||||||
Working capital |
$ | 865 | $ | 1,147 | -25 | % | $ | 1,411 | -39 | % | ||||||||||
Accounts receivable |
5,154 | 5,528 | -7 | % | 5,063 | 2 | % | |||||||||||||
Inventories |
1,571 | 1,521 | 3 | % | 1,935 | -19 | % | |||||||||||||
Accounts payable |
4,504 | 4,434 | 2 | % | 3,779 | 19 | % |
| The Company defines working capital as current assets less current liabilities, excluding cash, short-term debt, the current portion of long-term debt and net assets of discontinued operations. Management believes that this measure of working capital, which excludes financing-related items and discontinued activities, provides a more useful measurement of the Companys operating performance. |
| The decrease in working capital as compared to September 30, 2009 was primarily due to lower accounts receivable from improved collections and higher accounts payable due to increased purchasing activity and the timing of supplier payments, partially offset by higher inventory levels to support higher sales and a decrease in restructuring reserves. Compared to December 31, 2008, the decrease was primarily due to lower inventories based on increased turnover and higher accounts payable due to increased purchasing activity and the timing of supplier payments, partially offset by higher accounts receivable from higher sales and a decrease in restructuring reserves. |
| The Companys days sales in accounts receivable (DSO) for the three months ended December 31, 2009 were 54, lower than 58 and 62 for the comparable periods ended September 30, 2009 and December 31, 2008, respectively. The decrease in accounts receivable compared to September 30, 2009 was primarily due to improved collections. The increase in accounts receivable compared to December 31, 2008 was primarily due to higher sales volumes in the current first quarter as compared to the same quarter in the prior year. There has been no significant adverse change in the level of overdue receivables or material changes in revenue recognition methods. |
| The Companys inventory turns for the three months ended December 31, 2009 were slightly lower than the period ended September 30, 2009 primarily due to higher inventory production to meet increased demand. Inventory turns were higher compared to December 31, 2008, primarily due to increased sales volumes and improvements in inventory management. |
| Days payable at December 31, 2009 decreased to 68 days from 72 days at September 30, 2009 and 69 days at December 31, 2008 primarily due to the timing of supplier payments. |
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Cash Flows
December 31, | ||||||||
(in millions) | 2009 | 2008 | ||||||
Cash provided (used) by operating activities |
$ | 808 | $ | (317 | ) | |||
Cash used by investing activities |
(185 | ) | (357 | ) | ||||
Cash provided (used) by financing activities |
(593 | ) | 492 | |||||
Capital expenditures |
(177 | ) | (268 | ) |
| The increase in cash from operating activities for three months ended December 31, 2009 was primarily due to higher net income attributable to Johnson Controls, Inc. in the current quarter, favorable working capital changes in accounts payable and accrued income taxes, partially offset by unfavorable working capital changes in accounts receivable and inventory. |
| The decrease in cash used by investing activities for the three months ended December 31, 2009 was primarily due to lower capital expenditures, lower long-term investments and no acquisitions in the current quarter. |
| The increase in cash used by financing activities for the three months ended December 31, 2009 was primarily the result of debt repayments in the current quarter. |
| The decrease in capital expenditures for the three months ended December 31, 2009 was primarily due to the timing of payments for investments made within the automotive experience business. |
Deferred Taxes
The Company reviews its deferred tax asset valuation allowances on a quarterly basis. In
determining the potential need for a valuation allowance, the historical and projected financial
results of the legal entity or consolidated group recording the net deferred tax asset is
considered, along with any other positive or negative evidence. Since future financial results may
differ from previous estimates, periodic adjustments to the Companys valuation allowances may be
necessary.
The Company has certain subsidiaries, mainly located in Brazil, France, Italy, Mexico, Spain,
United Kingdom and the United States, which have generated operating and/or capital losses and, in
certain circumstances, have limited loss carry forward periods. In accordance with ASC 740, Income
Taxes, the Company is required to record a valuation allowance when it is more likely than not the
Company will not utilize deductible amounts or net operating losses for each legal entity or
consolidated group based on the tax rules in the applicable jurisdiction, evaluating both positive
and negative historical evidences as well as expected future events and tax planning strategies.
In the first quarter of fiscal 2010, the Company determined that it is more likely than not that a
portion of the deferred tax assets in Brazil would be utilized. Therefore, the Company released
$69 million of valuation allowances. This is comprised of a $93 million decrease in income tax
expense offset by a $24 million reduction in cumulative translation adjustments.
In the first quarter of fiscal 2009, the Company performed an analysis of its worldwide
deferred tax assets. As a result of the rapid deterioration in the economic environment, several
jurisdictions incurred unexpected losses in the first quarter that resulted in cumulative losses
over the prior three years. As a result, and after considering tax planning initiatives and other
positive and negative evidence, the Company
determined that it was more likely than not that the deferred tax assets would not be utilized in
several jurisdictions including France, Mexico, Spain and the United Kingdom. Therefore, the
Company recorded $300 million of valuation allowances as income tax expense. To the extent the
Company improves its underlying operating results in these jurisdictions, these valuation
allowances, or a portion thereof, could be reversed in future periods.
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Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances
indicate that the assets carrying amount may not be recoverable. The Company conducts its
long-lived asset impairment analyses in accordance with ASC 360-10-15, Impairment or Disposal of
Long-Lived Assets. ASC 360-10-15 requires the Company to group assets and liabilities at the
lowest level for which identifiable cash flows are largely independent of the cash flows of other
assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash
flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is
recoverable, an impairment charge is measured as the amount by which the carrying amount of the
asset group exceeds its fair value based on discounted cash flow analysis or appraisals. At
December 31, 2009, the Company concluded it did not have any triggering events requiring assessment
of impairment of its long-lived assets.
At December 31, 2008, in conjunction with the preparation of its financial statements, the Company
concluded it had a triggering event requiring assessment of impairment of its long-lived assets due
to the significant declines in North American and European automotive sales volumes. As a result,
the Company reviewed its long-lived assets for impairment and recorded a $110 million impairment
charge within cost of sales in the first quarter of fiscal 2009, of which $77 million related to
the North America automotive experience segment and $33 million related to the Europe automotive
experience segment.
The Company reviews its equity investments for impairment whenever there is a loss in value of an
investment which is other than a temporary decline. The Company conducts its equity investment
impairment analyses in accordance with ASC 323, Investments-Equity Method and Joint Ventures. ASC
323 requires the Company to record an impairment charge for a decrease in value of an investment
when the decline in the investment is considered to be other than temporary.
At December 31, 2008, in conjunction with the preparation of its financial statements, the Company
concluded it had a triggering event requiring assessment of impairment of its equity investment in
a 48%-owned joint venture with U.S. Airconditioning Distributors, Inc. (U.S. Air) due to the
significant decline in North American residential housing construction starts, which had
significantly impacted the financial results of the equity investment. The Company reviewed its
equity investment in U.S. Air for impairment and as a result, recorded a $152 million impairment
charge within equity income (loss) for its North America unitary products segment in the first
quarter of fiscal 2009. The U.S. Air investment balance included in the condensed consolidated
statement of financial position at December 31, 2009 was $57 million. The Company does not
anticipate future impairment of this investment as, based on its current forecasts, a further
decline in value that is other than temporary is not considered reasonably likely to occur.
Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable
net assets acquired. The Company reviews goodwill for impairment during the fourth fiscal quarter
or more frequently if events or changes in circumstances indicate the asset might be impaired. The
Company performs impairment reviews for its reporting units, which have been determined to be the
Companys reportable segments, using a fair-value method based on managements judgments and
assumptions or third party valuations. The fair value represents the amount at which a reporting
unit could be bought or sold in a current transaction between willing parties on an arms-length
basis. In estimating the fair value, the Company uses multiples of earnings based on the average of
historical, published multiples of earnings of comparable entities with similar operations and
economic characteristics. In certain instances, the Company uses discounted cash flow analyses to
further support the fair value estimates. The estimated fair value is then compared with the
carrying amount of the reporting unit, including recorded goodwill. The Company is subject to
financial statement risk to the extent that the carrying amount exceeds the estimated fair value.
At December 31, 2009, the Company concluded it did not have any triggering events requiring
assessment of impairment of goodwill.
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Capitalization
December 31, | September 30, | December 31, | ||||||||||||||
(in millions) | 2009 | 2009 | Change | 2008 | ||||||||||||
Total debt |
$ | 3,444 | $ | 3,966 | -13 | % | $ | 4,613 | ||||||||
Equity attributable to
Johnson Controls, Inc. |
9,353 | 9,138 | 2 | % | 8,313 | |||||||||||
Total capitalization |
$ | 12,797 | $ | 13,104 | -2 | % | $ | 12,926 | ||||||||
Total debt as a % of
total capitalization |
27 | % | 30 | % | 36 | % | ||||||||||
| In fiscal 2008, the Company entered into new committed, revolving credit facilities totaling 350 million euro with 100 million euro expiring in May 2009, 150 million euro expiring in May 2011 and 100 million euro expiring in August 2011. In May 2009 the 100 million euro revolving facility expired and the Company entered into a new one year committed, revolving credit facility in the amount of 50 million euro expiring in May 2010. At December 31, 2009, there were no draws on the revolving credit facilities. |
| In January 2009, the Company retired its 24 billion yen, three year, floating rate loan agreement that matured. The Company used proceeds from commercial paper issuances to repay the loan agreement. |
| In February 2009, the Company entered into a $50 million, three year, floating rate bilateral loan agreement. The Company drew the entire amount under the loan agreement during the course of the second quarter of fiscal 2009. Also during the second quarter of fiscal 2009, the Company retired approximately $54 million in principal amount of its $800 million fixed rate bonds that mature in January 2011. The Company used proceeds from the $50 million floating rate loan agreement to retire the bonds. The Company retired the loan during the fourth quarter of fiscal 2009. |
| In March 2009, the Company closed concurrent public offerings. The Company issued $402.5 million aggregate amount of 6.5% senior, unsecured, fixed rate convertible notes that mature September 30, 2012. The notes are convertible into shares of the Companys common stock at a conversion rate of 89.3855 shares of common stock per $1,000 principal amount of notes, which is equal to a conversion price of approximately $11.19 per share, subject to anti-dilution adjustments. The Company also issued nine million Equity Units (the Equity Units) each of which has a stated amount of $50 in an aggregate principal amount of $450 million. The Equity Units consist of (i) a forward purchase contract obligating the holder to purchase from the Company for a price in cash of $50, on the purchase contract settlement date of March 31, 2012, subject to early settlement, a certain number of shares of the Companys common stock and (ii) a 1/20, or 5%, undivided beneficial ownership interest in $1,000 principal amount of the Companys 11.5% subordinated notes due 2042. |
| In September 2009, the Company settled the results of its previously announced offer to exchange (a) any and all of its outstanding 6.5% convertible senior notes due 2012 for the following consideration per $1,000 principal amount of convertible senior notes: (i) 89.3855 shares of the Companys common stock, (ii) a cash payment of $120 and (iii) accrued and unpaid interest on the convertible senior notes to, but excluding, the settlement date, payable in cash. Upon settlement of the exchange offer, approximately $400 million aggregate principal amount of convertible senior notes were exchanged for approximately 36 million shares of common stock and approximately $61 million in cash ($48 million of debt conversion payments and $13 million of accrued interest on the convertible senior notes). As a result of the exchange, the Company recognized approximately $57 million of debt conversion expenses within its consolidated statement of income which is comprised of $48 million of debt conversion costs on the exchange and a $9 million charge related to the write-off of unamortized debt issuance costs. |
| In September 2009, the Company settled the results of its previously announced offer to exchange up to 8,550,000 of its nine million outstanding Equity Units in the form of Corporate Units (the Corporate Units) comprised of a purchase contract obligating the holder to purchase from the Company shares of its common stock and a 1/20, or 5%, undivided beneficial ownership interest in $1,000 principal amount of the Companys 11.50% subordinated notes due 2042, for the following consideration per Corporate Unit: (i) 4.8579 shares of the Companys common stock, (ii) a cash payment of $6.50 and (iii) a distribution consisting of the pro rata share of accrued and unpaid interest on the subordinated notes to, but excluding, the settlement date, payable in cash. Upon settlement of the exchange offer |
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approximately 8,082,085 Corporate Units (consisting of $404 million aggregate principal amount of outstanding 11.50% subordinated notes due 2042) were exchanged for approximately 39 million shares of common stock and approximately $65 million in cash ($52 million of debt conversion payments and $13 million of accrued interest payments on the subordinated notes). As a result of the exchange, the Company recognized approximately $54 million of debt conversion expenses within its consolidated statement of income which is comprised of $53 million of debt conversion costs on the exchange and a $1 million charge related to the write-off of unamortized debt issuance costs. |
| In November 2009, the Company repurchased 670 bonds ($670,000 par value) of its 6.5% convertible notes maturing September 30, 2012. The Company used cash to fund the repurchase. |
| In December 2009, the Company repurchased an additional 1,015 bonds ($1,015,000 par value) of its 6.5% convertible notes maturing September 30, 2012. The Company used cash to fund the repurchase. |
| In December 2009, the Company retired its 7 billion yen, three year, floating rate loan agreement that was scheduled to mature on January 18, 2011. The Company used cash to repay the note. |
| In December 2009, the Company retired its 12 billion yen, three year, floating rate loan agreement that matured. The Company used cash to repay the note. |
| In December 2009 the Company retired approximately $13 million in principal amount of its $746 million fixed rate bonds that was scheduled to mature on January 15, 2011. The Company used cash to fund the repurchase. |
| The Company also selectively makes use of short-term credit lines. The Company estimates that, as of December 31, 2009, it could borrow up to $2.0 billion at its current debt ratings on committed and uncommitted credit lines. |
| The Company believes its capital resources and liquidity position at December 31, 2009, are adequate to meet projected needs. The Company believes requirements for working capital, capital expenditures, dividends, minimum pension contributions, debt maturities and any potential acquisitions in fiscal 2010 will continue to be funded from operations, supplemented by short- and long-term borrowings, if required. The Company currently manages its short-term debt position in the U.S. and euro commercial paper markets and bank loan markets. In the event the Company is unable to issue commercial paper, it would have the ability to draw on its $2.05 billion revolving credit facility, which extends until December 2011. There were no draws on the revolving credit facility as of December 31, 2009. The Company does not have any significant debt maturities until fiscal 2011. As such, the Company believes it has sufficient financial resources to fund operations and meet its obligations for the foreseeable future. |
| The Companys debt financial covenants require a minimum consolidated shareholders equity attributable to Johnson Controls, Inc. of at least $1.31 billion at all times and allow a maximum aggregated amount of 10% of consolidated shareholders equity attributable to Johnson Controls, Inc. for liens and pledges. For purposes of calculating the Companys covenants, consolidated shareholders equity attributable to Johnson Controls, Inc. is calculated without giving effect to (i) the application of the Financial Accounting Standards Board (FASB) ASC 715-60, Defined Benefit Plans- Other Postretirement, or (ii) the cumulative foreign currency translation adjustment. As of December 31, 2009, consolidated shareholders equity attributable to Johnson Controls, Inc. as defined per our covenants was $8.8 billion and there were no outstanding amounts for liens and pledges. The Company expects to remain in compliance with all covenants and other requirements set forth in its credit agreements and indentures for the foreseeable future. None of the Companys debt agreements limit access to stated borrowing levels or require accelerated repayment in the event of a decrease in the Companys credit rating. |
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New Accounting Standards
In December 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-17, Consolidations
(Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest
Entities. ASU No. 2009-17 changes how a company determines when an entity that is insufficiently
capitalized or is not controlled through voting should be consolidated. The determination of
whether a company is required to consolidate an entity is based on, among other things, an
entitys purpose and design and a companys ability to direct the activities of the entity that
most significantly impact the entitys economic performance. This statement is effective for the
Company beginning in the first quarter of fiscal 2011 (October 1, 2010). The Company is assessing
the potential impact that the adoption of ASU No. 2009-17 will have on its consolidated financial
condition and results of operations.
In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements a consensus of the FASB Emerging Issues Task Force.
ASU No. 2009-13 establishes the accounting and reporting guidance for arrangements under which a
vendor will perform multiple revenue-generating activities. Specifically, this ASU addresses how
to separate deliverables and how to measure and allocate arrangement consideration to one or more
units of accounting. This guidance will be effective for the Company beginning in the first
quarter of fiscal 2011 (October 1, 2010) and, when adopted, will change the Companys accounting
treatment for multiple-element revenue arrangements on a prospective basis.
In December 2008, the FASB issued guidance on an employers disclosures about plan assets of a
defined benefit pension plan. The guidance requires enhanced transparency surrounding the types of
plan assets and associated risks, as well as disclosure of information about fair value
measurements of plan assets. This guidance is included in ASC 715, Compensation Retirement
Benefits, and is effective for the Company for the fiscal year ending September 30, 2010. The
adoption of this guidance will have no impact on the Companys consolidated financial condition
and results of operations.
In December 2007, the FASB issued guidance changing the accounting for business combinations in a
number of areas including the treatment of contingent consideration, preacquisition contingencies,
transaction costs, in-process research and development and restructuring costs. In addition, under
this guidance changes in an acquired entitys deferred tax assets and uncertain tax positions
after the measurement period will impact income tax expense. This guidance is included in ASC 805,
Business Combinations, and is effective for the Company in the first quarter of fiscal 2010
(October 1, 2009). This guidance changes the Companys accounting treatment for business
combinations on a prospective basis.
In December 2007, the FASB issued guidance changing the accounting and reporting for minority
interests, which will be recharacterized as noncontrolling interests and classified as a component
of equity. This new consolidation method changes the accounting for transactions with minority
interest holders. This guidance is included in ASC 810, Consolidation, and is effective for
fiscal years beginning after December 15, 2008. This guidance is effective for the Company in the
first quarter of fiscal 2010 (October 1, 2009). The adoption of this guidance has had no material
impact
on the Companys consolidated financial condition and results of operations. Refer to Note 14,
Equity Attributable to Johnson Controls, Inc. and Noncontrolling Interests for further
discussion.
In September 2006, the FASB issued guidance that defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements. This guidance also
establishes a fair value hierarchy that prioritizes information used in developing assumptions when
pricing an asset or liability. This guidance is included in ASC 820, Fair Value Measurements and
Disclosures. The Company adopted this guidance effective October 1, 2008. In February 2008, the
FASB delayed the effective date of this guidance for nonfinancial assets and nonfinancial
liabilities that are recognized or disclosed in the financial statements on a nonrecurring basis to
fiscal years beginning after November 15, 2008. The provisions of this guidance for nonfinancial
assets and nonfinancial liabilities are effective for the Company in the first quarter of fiscal
2010 (October 1, 2009) and will be applied prospectively to fair value assessments such as the
Companys goodwill impairment analysis.
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Other Financial Information
The interim financial information included in this Quarterly Report on Form 10-Q has not been
audited by PricewaterhouseCoopers LLP (PwC). PwC has, however applied limited review procedures in
accordance with professional standards for reviews of interim financial information. Accordingly,
you should restrict your reliance on their reports on such information. PwC is not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their reports on the interim
financial information because such reports do not constitute reports or parts of the
registration statements prepared or certified by PwC within the meaning of Sections 7 and 11 of the
Securities Act of 1933.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2009, the Company had not experienced any adverse changes in market risk
exposures that materially affected the quantitative and qualitative disclosures presented in the
Companys Annual Report on Form 10-K for the year ended September 30, 2009.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (Exchange Act). Based upon their evaluation of these
disclosure controls and procedures, the principal executive officer and principal financial officer
concluded that the disclosure controls and procedures were effective as of December 31, 2009 to
ensure that information required to be disclosed by the Company in the reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within the time period
specified in the SECs rules and forms, and to ensure that information required to be disclosed by
the Company in the reports it files or submits under the Exchange Act is accumulated and
communicated to the Companys management, including its principal executive and principal financial
officers, as appropriate, to allow timely decisions regarding disclosure.
Changes in Internal Control Over Financial Reporting
There have been no significant changes in the Companys internal control over financial reporting
during the three months ended December 31, 2009 that have materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As noted in Item 1 to the Companys Annual Report on Form 10-K for the year ended September 30,
2009, which was filed with the SEC on November 24, 2009, liabilities potentially arise globally
under various environmental laws and worker safety laws for activities that are not in compliance
with such laws and for the cleanup of sites where Company-related substances have been released
into the environment.
Currently, the Company is responding to allegations that it is responsible for performing
environmental remediation, or for the repayment of costs spent by governmental entities or others
performing remediation, at approximately 44 sites in the United States. Many of these sites are
landfills used by the Company in the past for the disposal of waste materials; others are secondary
lead smelters and lead recycling sites where the Company returned lead-containing materials for
recycling; a few involve the cleanup of Company manufacturing facilities; and the remaining fall
into miscellaneous categories. The Company may face similar claims of liability at additional sites
in the future. Where potential liabilities are alleged, the Company pursues a course of action
intended to mitigate them.
The Company accrues for potential environmental losses in a manner consistent with accounting
principles generally accepted in the United States; that is, when it is probable a loss has been
incurred and the amount of the
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loss is reasonably estimable. The Company reviews the status of its environmental sites on a
quarterly basis and adjusts its reserves accordingly. Such potential liabilities accrued by the
Company do not take into consideration possible recoveries of future insurance proceeds. They do,
however, take into account the likely share other parties will bear at remediation sites. It is
difficult to estimate the Companys ultimate level of liability at many remediation sites due to
the large number of other parties that may be involved, the complexity of determining the relative
liability among those parties, the uncertainty as to the nature and scope of the investigations and
remediation to be conducted, the uncertainty in the application of law and risk assessment, the
various choices and costs associated with diverse technologies that may be used in corrective
actions at the sites, and the often quite lengthy periods over which eventual remediation may
occur. Nevertheless, the Company has no reason to believe at the present time that any claims,
penalties or costs in connection with known environmental matters will have a material adverse
effect on the Companys financial position, results of operations or cash flows.
The Company is involved in a number of product liability and various other lawsuits incident to the
operation of its businesses. Insurance coverages are maintained and estimated costs are recorded
for claims and lawsuits of this nature. It is managements opinion that none of these will have a
material adverse effect on the Companys financial position, results of operations or cash flows.
Costs related to such matters were not material to the periods presented.
ITEM 1A. RISK FACTORS
There have been no material changes to the disclosure regarding risk factors presented in Item 1A
to the Companys Annual Report on Form 10-K for the year ended September 30, 2009.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In September 2006, the Companys Board of Directors authorized a stock repurchase program to
acquire up to $200 million of the Companys outstanding common stock. Stock repurchases under this
program may be made through open market, privately negotiated transactions or otherwise at times
and in such amounts as Company management deems appropriate. The stock repurchase program does not
have an expiration date and may be amended or terminated by the Board of Directors at any time
without prior notice.
The Company entered into an Equity Swap Agreement, dated March 18, 2004 and amended March 3, 2006
and May 16, 2006, with Citibank, N.A. (Citibank). The Company settled the Equity Swap Agreement at
the beginning of the second quarter of fiscal 2009. The Company entered into a new Swap Agreement,
dated March 13, 2009 (Swap Agreement), at the end of the second quarter of fiscal 2009. The Company
selectively uses equity swaps to reduce market risk associated with its stock-based compensation
plans, such as its deferred compensation plans. These equity compensation liabilities increase as
the Companys stock price increases and decrease as the Companys stock price decreases. In
contrast, the value of the Swap Agreement moves in the opposite direction of these liabilities,
allowing the Company to fix a portion of the liabilities at a stated amount.
In connection with the Swap Agreement, Citibank may purchase unlimited shares of the Companys
stock in the market or in privately negotiated transactions. The Company disclaims that Citibank is
an affiliated purchaser of the Company as such term is defined in Rule 10b-18(a)(3) under the
Securities Exchange Act or that Citibank is purchasing any shares for the Company. The Swap
Agreement has no stated expiration date. The net effect of the change in fair value of the Swap
Agreement and the change in equity compensation liabilities was not material to the Companys
earnings for the three months ended December 31, 2009.
The following table presents information regarding the repurchase of the Companys common stock by
the Company as part of the publicly announced program and purchases of the Companys common stock
by Citibank in connection with the Swap Agreement during the three months ended December 31, 2009.
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Approximate Dollar | ||||||||||||||||
Total Number of | Value of Shares that | |||||||||||||||
Total Number of | Shares Purchased as | May Yet be | ||||||||||||||
Shares | Average Price | Part of the Publicly | Purchased under the | |||||||||||||
Period | Purchased | Paid per Share | Announced Program | Programs | ||||||||||||
10/1/09 - 10/31/09 |
||||||||||||||||
Purchases by Company (1) |
| | | $ | 102,394,713 | |||||||||||
11/1/09 - 11/30/09 |
||||||||||||||||
Purchases by Company (1) |
| | | $ | 102,394,713 | |||||||||||
12/1/09 - 12/31/09 |
||||||||||||||||
Purchases by Company (1) |
| | | $ | 102,394,713 | |||||||||||
10/1/09 - 10/31/09 |
||||||||||||||||
Purchases by Citibank |
| | | NA | ||||||||||||
11/1/09 - 11/30/09 |
||||||||||||||||
Purchases by Citibank |
130,000 | $ | 26.82 | | NA | |||||||||||
12/1/09 - 12/31/09 |
||||||||||||||||
Purchases by Citibank |
270,000 | $ | 26.83 | | NA |
(1) | The repurchases of the Companys common stock by the Company are intended to partially offset dilution related to our stock option and restricted stock equity compensation plans and are treated as repurchases of Company common stock for purposes of this disclosure. |
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on January 27, 2010. The Companys
shareholders approved the election of four directors to serve for a three-year term expiring in
2013:
For | Withheld | Broker non-votes | ||||||||||
David P. Abney |
516,025,564 | 21,188,913 | 47,917,938 | |||||||||
Robert L. Barnett |
474,020,334 | 63,194,143 | 47,917,938 | |||||||||
Eugenio Clariond
Reyes-Retana |
510,198,329 | 27,016,148 | 47,917,938 | |||||||||
Jeffrey A. Joerres |
420,569,278 | 116,645,199 | 47,917,938 |
The other directors of the Company whose terms in office expire after the 2010 Annual Meeting of
Shareholders are as follows: terms expiring at the 2011 Annual Meeting of Shareholders Natalie A.
Black, Robert A. Cornog, William H. Lacy and Stephen A. Roell, and terms expiring at the 2012
Annual Meeting of Shareholders Dennis W. Archer, Richard Goodman and Southwood J. Morcott.
The ratification of the appointment of PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm for fiscal 2010 was approved by the shareholders with 577,591,345
shares voted for, 6,350,468 shares voted against and 1,190,602 shares abstaining.
The proposal requiring shareholder approval to adopt a majority vote standard passed by the
shareholders with 417,014,489 shares voted for, 115,712,394 shares voted against, 3,906,802 shares
abstaining and 48,498,730 broker non-votes.
ITEM 6. EXHIBITS
Reference is made to the separate exhibit index contained on page 44 filed herewith.
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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 3, 2010 | By: | /s/ R. Bruce McDonald | ||
R. Bruce McDonald | ||||
Executive Vice President and Chief Financial Officer |
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JOHNSON CONTROLS, INC.
Form 10-Q
INDEX
TO EXHIBITS
Exhibit No. | Description | |
12
|
Computation of ratio of earnings to fixed charges for the quarter ended December 31, 2009 and year ended September 30, 2009. | |
15
|
Letter of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, dated February 3, 2010, relating to Financial Information. | |
31.1
|
Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2
|
Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32
|
Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101
|
The following materials from Johnson Controls, Inc.s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Financial Position, (ii) the Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Cash Flow, and (iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. * |
* | Furnished herewith. |
44