Johnson Controls Inc
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JOHNSON CONTROLS INC FORM 10-K (Annual Report) Filed 12/9/2005 For Period Ending 9/30/2005 Address 5757 N GREEN BAY AVENUE P O BOX 591 MILWAUKEE, Wisconsin 53201 Telephone 414-524-1200 CIK 0000053669 Industry Auto & Truck Parts Sector Consumer Cyclical Fiscal Year 09/30 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended September 30, 2005 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-5097 JOHNSON CONTROLS, INC. (Exact name of registrant as specified in its charter) Wisconsin 39 -0380010 (State of Incorporation) (I.R.S. Employer Identification No.) 5757 N. Green Bay Avenue 53201 P.O. Box 591 (Zip Code) Milwaukee, Wisconsin (Address of principal executive offices) Registrant’s telephone number, including area code: (414) 524-1200 Securities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $.04 -1/6 par value New York Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: None 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 No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No The aggregate market value of the registrant’s stock held by non-affiliates of the registrant on March 31, 2005 was approximately $10.7 billion. 192,972,870 shares of the registrant’s Common Stock, par value $0.04 1 / 6 per share, were outstanding on October 31, 2005. DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates by reference portions of the Proxy Statement dated and filed with the Securities and Exchange Commission on December 12, 2005. JOHNSON CONTROLS, INC. Index to Annual Report on Form 10-K Year Ended September 30, 2005 Page CAUTIONARY STATEMENTS FOR FORWARD -LOOKING INFORMATION 3 PART I. ITEM 1. BUSINESS 3 ITEM 2. PROPERTIES 9 ITEM 3. LEGAL PROCEEDINGS 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14 EXECUTIVE OFFICERS OF THE REGISTRANT 14 PART II. ITEM 5. MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS 16 ITEM 6. SELECTED FINANCIAL DATA 18 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 40 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 41 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 89 ITEM 9A. CONTROLS AND PROCEDURES 89 ITEM 9B. OTHER INFORMATION 91 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 91 ITEM 11. EXECUTIVE COMPENSATION 91 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 91 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 91 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 91 PART IV. ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE 92 SIGNATURES 93 INDEX TO EXHIBITS 94 Restricted Stock Plan Restricted Stock Plan X Statement Regarding Computation of Ratio of Earnings to Fixed Charges Subsidiaries of the Registrant Consent of Independent Registered Public Accounting Firm 302 Certification of Chief Executive Officer 302 Certification of Chief Financial Officer 906 Certifications of CEO and CFO 2 Table of Contents CAUTIONARY STATEMENTS FOR FORWARD -LOOKING INFORMATION Johnson Controls, Inc. (“the Company”) has made forward-looking statements in this document pertaining to its financial results for fiscal 2006 and future years that are based on preliminary data and are subject to risks and uncertainties. All statements other than statements of historical fact are statements that are or could be deemed forward-looking statements, including information concerning possible or assumed future risks. For those statements, the Company cautions that numerous important factors, such as the completion of the acquisition of York International Corporation in December 2005, automotive vehicle production levels and schedules, the ability to increase prices due to higher raw material costs, the strength of the U.S. or other economies, currency exchange rates, the Company’s effective tax rate, cancellation of commercial contracts, as well as those factors discussed in the Company’s Form 8-K filing (dated October 7, 2005), could affect the Company’s actual results and could cause its actual consolidated results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company. IMPORTANT DISCLOSURES On April 1, 2005, the Company deconsolidated a North American interior experience joint venture as it was determined the Company no longer had effective control over the venture’s operating activities. Subsequent to April 1, 2005, the Company determined that based on SFAS 94, “Consolidation of All Majority-Owned Subsidiaries,” the joint venture should not have been consolidated in prior periods. As such, the Company’s financial statements have been restated to account for the joint venture on an equity basis in accordance with APB 18, “The Equity Method of Accounting for Investments in Common Stock” for all periods prior to April 1, 2005. The deconsolidation had no impact on previously reported income from continuing operations, net income or earnings per share. Prior year results of operations, financial position, cash flows and other financial information included in the following Form 10-K have been restated to reflect the current year’s presentation. Subsequent to September 30, 2005, the Company identified intercompany subsidiary upstream guarantees, issued March 21, 2001, applicable to certain third-party debt of the Company. Based upon the nature of these guarantees, the Company has determined that condensed guarantor subsidiary financial statement information should have been disclosed in its previously filed interim and annual financial statements since the issuance of the guarantees. As a result, the Company has restated its fiscal 2004 and fiscal 2003 consolidated financial statements to include these required disclosures. As the restatement relates only to the disclosure of guarantor financial information, the previously reported amounts in the Consolidated Statement of Income and the Consolidated Statement of Financial Position remain unchanged. PART I ITEM 1 BUSINESS General Development of Business Johnson Controls, Inc. is a Wisconsin corporation organized in 1885. Its principal office is located at 5757 North Green Bay Avenue, P.O. Box 591, Milwaukee, Wisconsin 53201. From 1885 through 1978, the Company’s operations were predominantly in the building efficiency business. Since 1978, the Company’s operations have been diversified through acquisitions and internal growth. The Company operates in three primary businesses: building efficiency, interior experience, and power solutions (the businesses were formerly referred to as Controls Group, Seating and Interiors Group, and Battery Group, respectively). The building efficiency business is a global market leader in providing installed building control systems and technical and facility management services, including comfort, energy and security management for the non-residential buildings market. The business’s installed systems integrate the management, operation and control of building control systems such as temperature, ventilation, humidity, fire safety and security. The business’s technical and facility management services provide a complete suite of integrated solutions to improve building operations and maintenance. 3 Table of Contents In 1985, the Company entered the automotive seating market through the acquisition of Hoover Universal, Inc. During the late 1990’s, the Company expanded into additional interior systems and geographic markets. The Company’s automotive seating and interior systems business operates under the name interior experience, and the Company is among the world’s largest automotive suppliers. Interior experience provides seating, instrument panel, overhead, floor console and door systems to more than 35 million vehicles annually. In 1978, the Company entered the North American battery market through the acquisition of Globe-Union, Inc. and grew in this market through internal growth and strategic acquisitions. The Company’s power solutions business services both automotive original equipment manufacturers and the general vehicle battery aftermarket by providing advanced