JCI-2013.3.31-10Q


 
 
 
 
 
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 March 31, 2013
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 or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
 
 
5757 North Green Bay Avenue
 
 
Milwaukee, Wisconsin
 
53209
(Address of principal executive offices)
 
(Zip Code)
(414) 524-1200
(Registrant’s telephone number, including area code)

Not Applicable
(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  ¨
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  ¨
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.
Large accelerated filer
 
þ
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
  
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  ¨    No  þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
Shares Outstanding at March 31, 2013
Common Stock: $1.00 par value per share
 
684,995,294
 
 
 
 
 

1

JOHNSON CONTROLS, INC.
FORM 10-Q
Report Index

  
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
Johnson Controls, Inc.
Consolidated Statements of Financial Position
(in millions, except par value; unaudited)
 
 
 
 
 
 
 
March 31, 2013
 
September 30, 2012
 
March 31, 2012
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
481

 
$
265

 
$
240

Accounts receivable - net
7,317

 
7,308

 
7,402

Inventories
2,298

 
2,227

 
2,374

Other current assets
2,730

 
2,873

 
2,346

Current assets
12,826

 
12,673

 
12,362

 
 
 
 
 
 
Property, plant and equipment - net
6,525

 
6,440

 
6,086

Goodwill
7,097

 
6,982

 
7,040

Other intangible assets - net
1,126

 
947

 
966

Investments in partially-owned affiliates
1,059

 
948

 
961

Other noncurrent assets
3,224

 
2,894

 
3,558

Total assets
$
31,857

 
$
30,884

 
$
30,973

 
 
 
 
 
 
Liabilities and Equity
 
 
 
 
 
 
 
 
 
 
 
Short-term debt
$
957

 
$
323

 
$
530

Current portion of long-term debt
1,123

 
424

 
148

Accounts payable
6,146

 
6,114

 
6,313

Accrued compensation and benefits
979

 
1,090

 
956

Other current liabilities
2,896

 
2,904

 
2,608

Current liabilities
12,101

 
10,855

 
10,555

 
 
 
 
 
 
Long-term debt
4,590

 
5,321

 
5,645

Pension and postretirement benefits
1,211

 
1,248

 
782

Other noncurrent liabilities
1,718

 
1,504

 
1,928

Long-term liabilities
7,519

 
8,073

 
8,355

 
 
 
 
 
 
Commitments and contingencies (Note 18)


 


 


 
 
 
 
 
 
Redeemable noncontrolling interests
205

 
253

 
318

 
 
 
 
 
 
Common stock, $1.00 par value
693

 
688

 
684

Capital in excess of par value
2,181

 
2,047

 
1,992

Retained earnings
8,846

 
8,541

 
8,396

Treasury stock, at cost
(230
)
 
(179
)
 
(110
)
Accumulated other comprehensive income
308

 
458

 
633

Shareholders’ equity attributable to Johnson Controls, Inc.
11,798

 
11,555

 
11,595

Noncontrolling interests
234

 
148

 
150

Total equity
12,032

 
11,703

 
11,745

Total liabilities and equity
$
31,857

 
$
30,884

 
$
30,973

The accompanying notes are an integral part of the financial statements.


3



Johnson Controls, Inc.
Consolidated Statements of Income
(in millions, except per share data; unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2013
 
2012
 
2013
 
2012
Net sales
 
 
 
 
 
 
 
Products and systems*
$
8,407

 
$
8,495

 
$
16,764

 
$
16,829

Services*
2,023

 
2,070

 
4,088

 
4,153

 
10,430

 
10,565

 
20,852

 
20,982

Cost of sales
 
 
 
 
 
 
 
Products and systems*
7,263

 
7,299

 
14,478

 
14,458

Services*
1,679

 
1,713

 
3,378

 
3,435

 
8,942

 
9,012

 
17,856

 
17,893

 
 
 
 
 
 
 
 
Gross profit
1,488

 
1,553

 
2,996

 
3,089

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
(1,091
)
 
(1,050
)
 
(2,143
)
 
(2,085
)
Restructuring costs
(84
)
 
—

 
(84
)
 
—

Net financing charges
(66
)
 
(63
)
 
(127
)
 
(112
)
Equity income
148

 
79

 
233

 
199

 
 
 
 
 
 
 
 
Income before income taxes
395

 
519

 
875

 
1,091

 
 
 
 
 
 
 
 
Provision for income taxes
217

 
102

 
313

 
215

 
 
 
 
 
 
 
 
Net income
178

 
417

 
562

 
876

 
 
 
 
 
 
 
 
Income attributable to noncontrolling interests
30

 
38

 
60

 
73

 
 
 
 
 
 
 
 
Net income attributable to Johnson Controls, Inc.
$
148

 
$
379

 
$
502

 
$
803

 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
Basic
$
0.22

 
$
0.56

 
$
0.73

 
$
1.18

Diluted
$
0.21

 
$
0.55

 
$
0.73

 
$
1.17


*
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



Johnson Controls, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(in millions; unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
Net income
$
178

 
$
417

 
$
562

 
$
876

 
 
 
 
 
 
 
 
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(179
)
 
174

 
(136
)
 
(54
)
Realized and unrealized gains (losses) on derivatives
(7
)
 
19

 
(8
)
 
29

Unrealized gains on marketable common stock
3

 
11

 
6

 
8

Pension and postretirement plans
(3
)
 
(3
)
 
(12
)
 
—

 
 
 
 
 
 
 
 
Other comprehensive income (loss)
(186
)
 
201

 
(150
)
 
(17
)
 
 
 
 
 
 
 
 
Total comprehensive income (loss)
(8
)
 
618

 
412

 
859

 
 
 
 
 
 
 
 
Comprehensive income attributable to noncontrolling interests
31

 
37

 
60

 
72

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Johnson Controls, Inc.
$
(39
)
 
$
581

 
$
352

 
$
787


The accompanying notes are an integral part of the financial statements.

5


Johnson Controls, Inc.
Consolidated Statements of Cash Flows
(in millions; unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2013
 
2012
 
2013
 
2012
Operating Activities
 
 
 
 
 
 
 
Net income attributable to Johnson Controls, Inc.
$
148

 
$
379

 
$
502

 
$
803

Income attributable to noncontrolling interests
30

 
38

 
60

 
73

Net income
178

 
417

 
562

 
876

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
234

 
200

 
457

 
396

Pension and postretirement benefit cost (credit)
3

 
6

 
(13
)
 
13

Pension and postretirement contributions
(29
)
 
(22
)
 
(45
)
 
(364
)
Equity in earnings of partially-owned affiliates, net of dividends received
(51
)
 
(59
)
 
(99
)
 
(161
)
Deferred income taxes
129

 
(26
)
 
121

 
43

Impairment charges
13

 
14

 
13

 
14

Gain on divestitures - net
—

 
(35
)
 
—

 
(35
)
Fair value adjustment of equity investment
(82
)
 
(12
)
 
(82
)
 
(12
)
Other
14

 
18

 
27

 
36

Changes in assets and liabilities, excluding acquisitions and divestitures:
 
 
 
 
 
 
 
Receivables
(295
)
 
(277
)
 
(54
)
 
(71
)
Inventories
(64
)
 
(74
)
 
(84
)
 
(69
)
Other assets
(70
)
 
(9
)
 
(292
)
 
(195
)
Accounts payable and accrued liabilities
282

 
181

 
81

 
(134
)
Accrued income taxes
(45
)
 
(79
)
 
(77
)
 
(191
)
Cash provided by operating activities
217

 
243

 
515

 
146

 
 
 
 
 
 
 
 
Investing Activities
 
 
 
 
 
 
 
Capital expenditures
(293
)
 
(448
)
 
(664
)
 
(986
)
Sale of property, plant and equipment
29

 
3

 
46

 
6

Acquisition of businesses, net of cash acquired
(113
)
 
(19
)
 
(113
)
 
(30
)
Business divestitures
—

 
91

 
—

 
91

Settlement of cross-currency interest rate swaps
47

 
(9
)
 
53

 
(19
)
Changes in long-term investments
—

 
2

 
(17
)
 
(98
)
Warrant redemption
—

 
—

 
—

 
25

Cash used by investing activities
(330
)
 
(380
)
 
(695
)
 
(1,011
)
 
 
 
 
 
 
 
 
Financing Activities
 
 
 
 
 
 
 
Increase (decrease) in short-term debt - net
245

 
186

 
637

 
(98
)
Increase in long-term debt
1

 
136

 
91

 
1,235

Repayment of long-term debt
(5
)
 
(9
)
 
(114
)
 
(16
)
Stock repurchases
(50
)
 
(33
)
 
(50
)
 
(33
)
Payment of cash dividends
—

 
(123
)
 
(253
)
 
(232
)
Proceeds from the exercise of stock options
51

 
16

 
85

 
21

Other
27

 
(17
)
 
28

 
(40
)
Cash provided by financing activities
269

 
156

 
424

 
837

Effect of exchange rate changes on cash and cash equivalents
11

 
(20
)
 
(28
)
 
11

Increase (decrease) in cash and cash equivalents
167

 
(1
)
 
216

 
(17
)
Cash and cash equivalents at beginning of period
314

 
241

 
265

 
257

Cash and cash equivalents at end of period
$
481

 
$
240

 
$
481

 
$
240

The accompanying notes are an integral part of the financial statements.

6

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)


1.
Financial Statements

In the opinion of management, the accompanying unaudited 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 omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). These 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, 2012. The results of operations for the three and six month periods ended March 31, 2013 are not necessarily indicative of results for the Company’s 2013 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 Company’s interest exceeds 20% and the Company does not have a controlling interest.

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. To determine whether to consolidate a partially-owned affiliate, the Company first determines 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 entity’s residual economics; or 4) the entity was established with non-substantive voting. If the entity meets one of these characteristics, the Company then determines if it is the primary beneficiary of the VIE. The party with the power to direct activities of the VIE that most significantly impact the VIE’s economic performance and the potential to absorb benefits or losses that could be significant to the VIE is considered the primary beneficiary and consolidates the VIE. If the entity is not considered a VIE, then the Company applies the voting interest model to determine whether or not the Company shall consolidate the partially-owned affiliate.

Consolidated VIEs

Based upon the criteria set forth in ASC 810, the Company has determined that it was the primary beneficiary in three VIEs for the reporting periods ended March 31, 2013, September 30, 2012 and March 31, 2012, as the Company absorbs significant economics of the entities and has the power to direct the activities that are considered most significant to the entities.

Two of the VIEs manufacture products in North America for the automotive industry. The Company funds the entities’ short term liquidity needs through revolving credit facilities and has the power to direct the activities that are considered most significant to the entities through its key customer supply relationships.

During the three month period ended December 31, 2011, a pre-existing VIE accounted for under the equity method was reorganized into three separate investments as a result of the counterparty exercising its option to put its interest to the Company. The Company acquired additional interests in two of the reorganized group entities. The reorganized group entities are considered to be VIEs as the other owner party has been provided decision making rights but does not have equity at risk. The Company is considered the primary beneficiary of one of the entities due to the Company’s power pertaining to decisions over significant activities of the entity. As such, this VIE has been consolidated within the Company’s consolidated statements of financial position. The impact of consolidation of the entity on the Company’s consolidated statements of income for the three and six month periods ended March 31, 2013 and 2012 was not material. The VIE is named as a co-obligor under a third party debt agreement in the amount of $135 million, maturing in fiscal 2019, under which it could become subject to paying more than its allocated share of the third party debt in the event of bankruptcy of one or more of the other co-obligors. The other co-obligors, all related parties in which the Company is an equity investor, consist of the remaining group entities involved in the reorganization. As part of the overall reorganization transaction, the Company has also provided financial support to the group entities in the form of loans totaling $101 million, which are subordinate to the third party debt agreement. The Company is a significant customer of certain co-obligors, resulting in a remote possibility of loss. Additionally, the Company is subject to a floor guaranty expiring in fiscal 2022; in the event that the other owner party no longer owns any

7

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

part of the group entities due to sale or transfer, the Company has guaranteed that the proceeds received from the sale or transfer will not be less than $25 million. The Company has partnered with the group entities to design and manufacture battery components for the Power Solutions business.

The carrying amounts and classification of assets (none of which are restricted) and liabilities included in the Company’s consolidated statements of financial position for the consolidated VIEs are as follows (in millions):

 
March 31, 2013
 
September 30,
2012

 
March 31, 2012
Current assets
$
261

 
$
199

 
$
218

Noncurrent assets
148

 
144

 
168

Total assets
$
409

 
$
343

 
$
386

 
 
 
 
 
 
Current liabilities
$
183

 
$
172

 
$
151

Noncurrent liabilities
24

 
25

 
41

Total liabilities
$
207

 
$
197

 
$
192


The Company did not have a significant variable interest in any other consolidated VIEs for the presented reporting periods.

Nonconsolidated VIEs

The Company has a 40% interest in an equity method investee whereby the investee is a VIE. The investee produces and sells lead-acid batteries of which the Company will both purchase and supply certain batteries to complement each investment partners’ portfolio. The Company has a contractual right to purchase the remaining 60% equity interest in the investee between May 2014 and May 2016 (the “call option”). If the Company does not exercise the call option prior to its expiration in May 2016, for a period of six months thereafter the Company is subject to a contractual obligation at the counterparty’s option to sell the Company’s equity investment in the investee to the counterparty (the “repurchase option”). The purchase price is fixed under both the call option and the repurchase option. Based upon the criteria set forth in ASC 810, the Company has determined that the investee is a VIE as the equity holders, through their equity investments, may not participate fully in the entity’s residual economics. The Company is not the primary beneficiary as the Company does not have the power to make key operating decisions considered to be most significant to the VIE. Therefore, the investee is accounted for under the equity method of accounting as the Company’s interest exceeds 20% and the Company does not have a controlling interest. The investment balance included within investments in partially-owned affiliates in the consolidated statements of financial position at March 31, 2013, September 30, 2012 and March 31, 2012 was $56 million, $55 million and $52 million, respectively, which represents the Company’s maximum exposure to loss. Current assets and liabilities related to the VIE are immaterial and represent normal course of business trade receivables and payables for all presented periods.

As mentioned previously within the “Consolidated VIEs” section above, during the three month period ended December 31, 2011, a pre-existing VIE was reorganized into three separate investments as a result of the counterparty exercising its option to put its interest to the Company. The reorganized group entities are considered to be VIEs as the other owner party has been provided decision making rights but does not have equity at risk. The Company is not considered to be the primary beneficiary of two of the entities as the Company cannot make key operating decisions considered to be most significant to the VIEs. Therefore, these two entities are accounted for under the equity method of accounting as the Company’s interest exceeds 20% and the Company does not have a controlling interest. The Company’s maximum exposure to loss includes the partially-owned affiliate investment balance of $56 million, $52 million and $39 million at March 31, 2013, September 30, 2012 and March 31, 2012, respectively, as well as the subordinated loan from the Company, third party debt agreement and floor guaranty mentioned previously within the “Consolidated VIEs” section above. Current liabilities due to the VIEs are not material and represent normal course of business trade payables for all presented periods.

The Company did not have a significant variable interest in any other unconsolidated VIEs for the presented reporting periods.



8

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

Retrospective Changes

Certain amounts as of September 30, 2012 and March 31, 2012 have been revised to conform to the current year’s presentation.

Effective October 1, 2012, the Company reorganized the reportable segments within its Automotive Experience business to align with its new management reporting structure and business activities. As a result of this change, Automotive Experience is comprised of three new reportable segments for financial reporting purposes: Seating, Interiors and Electronics. Historical information has been revised to reflect the new Automotive Experience reportable segment structure. Refer to Note 6, “Goodwill and Other Intangible Assets,” and Note 17, “Segment Information,” of the notes to consolidated financial statements for further information.

In the fourth quarter of fiscal 2012, the Company changed its accounting policy for recognizing pension and postretirement benefit expenses. The Company’s historical accounting treatment smoothed asset returns and amortized deferred actuarial gains and losses over future years. The new mark-to-market approach includes measuring the market related value of plan assets at fair value instead of utilizing a three-year smoothing approach. In addition, the Company has elected to completely eliminate the corridor approach and recognize actuarial gains and losses in the fourth quarter of each fiscal year or at the date of a remeasurement event. The Company believes this new policy is preferable and provides greater transparency to on-going operational results. The change has no impact on future pension and postretirement funding or benefits paid to participants. The change has been reported through retrospective application of the new policy to all periods presented. This change resulted in a $15 million increase in net income attributable to Johnson Controls, Inc. ($0.02 per diluted share) for the three months ended March 31, 2012 and a $29 million increase in net income attributable to Johnson Controls, Inc. ($0.05 per diluted share) for the six months ended March 31, 2012.

In January 2013, the Company’s shareholders approved a restatement of the Company’s articles of incorporation that included the simplification of the par value of the Company’s common stock by changing the par value from $0.01 7/18 per share to $1.00 per share. This change resulted in an increase to common stock and corresponding reduction in capital in excess of par value in the consolidated statements of financial position and is reported through retrospective application of the new par value for all periods presented.

2.
New Accounting Standards

In March 2013, the FASB issued Accounting Standards Update (ASU) No. 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity." ASU No. 2013-05 clarifies when companies should release the cumulative translation adjustment (CTA) into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. Additionally, ASU No. 2013-05 states that CTA should be released into net income upon an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date (step acquisition). ASU No. 2013-05 will be effective prospectively for the Company for the quarter ending December 31, 2014, with early adoption permitted. The significance of this guidance for the Company is dependent on any future derecognition events involving the Company's foreign entities.

In February 2013, the FASB issued ASU No. 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." ASU No. 2013-02 requires companies to provide information about the amounts reclassified out of accumulated other comprehensive income by component. Additionally, companies are required to disclose these reclassifications by each respective line item on the statements of income. ASU No. 2013-02 is effective for the Company for the quarter ended December 31, 2013, though the Company has early adopted as permitted. The adoption of this guidance had no impact on the Company's consolidated financial condition or results of operations. Refer to Note 13, "Equity and Noncontrolling Interests," of the notes to consolidated financial statements for disclosures regarding other comprehensive income.

In July 2012, the FASB issued ASU No. 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment.” ASU No. 2012-02 provides companies an option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived

9

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

intangible asset is impaired. If, as a result of the qualitative assessment, it is determined that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the Company is not required to take further action. ASU No. 2012-02 is effective for the Company for impairment tests of indefinite-lived intangible assets performed in the current fiscal year. The adoption of this guidance had no impact on the Company’s consolidated financial condition or results of operations.

In December 2011, the FASB issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” ASU No. 2011-11 requires additional quantitative and qualitative disclosures of gross and net information regarding financial instruments and derivative instruments that are offset or eligible for offset in the consolidated statement of financial position. ASU No. 2011-11 will be effective for the Company for the quarter ending December 31, 2013. The adoption of this guidance will have no impact on the Company’s consolidated financial condition or results of operations.
 
In September 2011, the FASB issued ASU No. 2011-08, “Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment.” ASU No. 2011-08 provides companies an option to perform a qualitative assessment to determine whether further goodwill impairment testing is necessary. If, as a result of the qualitative assessment, it is determined that it is more likely than not that a reporting unit’s fair value is less than its carrying amount, the two-step quantitative impairment test is required. Otherwise, no further testing is required. ASU No. 2011-08 is effective for the Company for goodwill impairment tests performed in the current fiscal year. The adoption of this guidance will have no impact on the Company’s consolidated financial condition or results of operations.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” ASU No. 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of shareholders’ equity. All non-owner changes in shareholders’ equity instead must be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU No. 2011-05 was effective for the Company for the quarter ended December 31, 2012. The adoption of this guidance had no impact on the Company’s consolidated financial condition or results of operations. Refer to the consolidated statements of comprehensive income (loss) and Note 13, “Equity and Noncontrolling Interests,” of the notes to consolidated financial statements for disclosures regarding other comprehensive income.

3.
Acquisitions and Divestitures

In the first six months of fiscal 2013, the Company completed two acquisitions for a combined purchase price, net of cash acquired, of $113 million, all of which was paid in the six months ended March 31, 2013. The acquisitions in the aggregate were not material to the Company's consolidated financial statements. In connection with the acquisitions, the Company recorded goodwill of $177 million. The purchase price allocations may be subsequently adjusted to reflect final valuation studies. As a result of one of the acquisitions, which increased the Company's ownership from a noncontrolling to controlling interest, the Company recorded a non-cash gain of $82 million in Automotive Experience Seating equity income to adjust the Company's existing equity investment in the partially-owned affiliate in India to fair value.

There were no business divestitures for the six months ended March 31, 2013.

In the second quarter of fiscal 2013, the Company announced it is exploring the potential sale of its Automotive Experience Electronics business. The process is in the early stages.

In the first six months of fiscal 2012, the Company completed three acquisitions for a combined purchase price, net of cash acquired, of $38 million, all of which was paid in the six months ended March 31, 2012. The acquisitions in the aggregate were not material to the Company's consolidated financial statements. In connection with the acquisitions, the Company recorded goodwill of $71 million. As a result of two of the acquisitions, which increased the Company's ownership from a noncontrolling to controlling interest, the Company recorded a non-cash gain of $12 million, of which $9 million was recorded in Power Solutions equity income and $3 million was recorded in Automotive Experience Seating equity income, to adjust the Company's existing equity investments in the partially-owned affiliates to fair value.

In the first six months of fiscal 2012, the Company adjusted the purchase price allocation of certain fiscal 2011 acquisitions. The adjustments were as a result of a true-up to the purchase price in the amount of $8 million, for which the cash was received

10

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

in the first quarter of fiscal 2012. Also, in connection with these acquisitions, the Company recorded an increase in goodwill of $13 million in fiscal 2012 related to the purchase price allocations.

In the second quarter of fiscal 2012, the Company completed two divestitures for a combined sales price of $91 million, all of which was received in the three months ended March 31, 2012. The divestitures in the aggregate were not material to the Company's consolidated financial statements. In connection with the divestitures, the Company recorded a gain, net of transaction costs, of $35 million and reduced goodwill by $29 million in the Building Efficiency business.

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 primarily within accounts receivable - net and billings in excess of costs and earnings on uncompleted contracts primarily within other current liabilities in the consolidated statements of financial position. Costs and earnings in excess of billings related to these contracts were $525 million, $548 million and $489 million at March 31, 2013, September 30, 2012 and March 31, 2012, respectively. Billings in excess of costs and earnings related to these contracts were $410 million, $365 million and $412 million at March 31, 2013, September 30, 2012 and March 31, 2012, respectively.

5.
Inventories

Inventories consisted of the following (in millions):

 
March 31, 2013
 
September 30, 2012
 
March 31, 2012
Raw materials and supplies
$
1,112

 
$
1,118

 
$
1,175

Work-in-process
463

 
417

 
457

Finished goods
837

 
806

 
863

FIFO inventories
2,412

 
2,341

 
2,495

LIFO reserve
(114
)
 
(114
)
 
(121
)
Inventories
$
2,298

 
$
2,227

 
$
2,374



11

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

6.
Goodwill and Other Intangible Assets

Effective October 1, 2012, the Company reorganized the reportable segments within its Automotive Experience business to align with its new management reporting structure and business activities. Historical information has been revised to reflect the new Automotive Experience reportable segment structure. Refer to Note 17, “Segment Information,” of the notes to consolidated financial statements for further information.

The changes in the carrying amount of goodwill in each of the Company’s reportable segments for the six month period ended September 30, 2012 and the six month period ended March 31, 2013 were as follows (in millions):

 
March 31, 2012
 
Business Acquisitions
 
Business Divestitures
 
Currency Translation and Other
 
September 30, 2012
Building Efficiency
 
 
 
 
 
 
 
 
 
North America Systems
$
520

 
$
—

 
$
—

 
$
1

 
$
521

North America Service
708

 
—

 
—

 
—

 
708

Global Workplace Solutions
186

 
—

 
—

 
1

 
187

Asia
391

 
—

 
—

 
5

 
396

Other
1,034

 
—

 
(5
)
 
(35
)
 
994

Automotive Experience
 
 
 
 
 
 
 
 

Seating
2,493

 
21

 
—

 
(30
)
 
2,484

Interiors
383

 
—

 
—

 
19

 
402

Electronics
250

 
—

 
—

 
—

 
250

Power Solutions
1,075

 
(26
)
 
—

 
(9
)
 
1,040

Total
$
7,040

 
$
(5
)
 
$
(5
)
 
$
(48
)
 
$
6,982

 
 
 
 
 
 
 
 
 
 
 
September 30, 2012
 
Business Acquisitions
 
Business Divestitures
 
Currency Translation and Other
 
March 31, 2013
Building Efficiency
 
 
 
 
 
 
 
 
 
North America Systems
$
521

 
$
—

 
$
—

 
$
—

 
$
521

North America Service
708

 
—

 
—

 
—

 
708

Global Workplace Solutions
187

 
37

 
—

 
(5
)
 
219

Asia
396

 
—

 
—

 
(11
)
 
385

Other
994

 
—

 
—

 
4

 
998

Automotive Experience
 
 
 
 
 
 
 
 

Seating
2,484

 
140

 
—

 
(47
)
 
2,577

Interiors
402

 
—

 
—

 
(1
)
 
401

Electronics
250

 
—

 
—

 
—

 
250

Power Solutions
1,040

 
—

 
—

 
(2
)
 
1,038

Total
$
6,982

 
$
177

 
$
—

 
$
(62
)
 
$
7,097


12

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

The Company’s other intangible assets, primarily from business acquisitions, consisted of (in millions):

 
March 31, 2013
 
September 30, 2012
 
March 31, 2012
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Amortized intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Patented technology
$
165

 
$
(99
)
 
$
66

 
$
188

 
$
(113
)
 
$
75

 
$
193

 
$
(107
)
 
$
86

Customer relationships
620

 
(124
)
 
496

 
517

 
(117
)
 
400

 
511

 
(101
)
 
410

Miscellaneous
333

 
(84
)
 
249

 
204

 
(47
)
 
157

 
194

 
(39
)
 
155

Total amortized intangible assets
1,118

 
(307
)
 
811

 
909

 
(277
)
 
632

 
898

 
(247
)
 
651

Unamortized intangible assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trademarks
315

 
—

 
315

 
315

 
—

 
315

 
315

 
—

 
315

Total intangible assets
$
1,433

 
$
(307
)
 
$
1,126

 
$
1,224

 
$
(277
)
 
$
947

 
$
1,213

 
$
(247
)
 
$
966


Amortization of other intangible assets for the three month periods ended March 31, 2013 and 2012 was $20 million and $11 million, respectively. Amortization of other intangible assets for the six month periods ended March 31, 2013 and 2012 was $38 million and $25 million, respectively. Excluding the impact of any future acquisitions, the Company anticipates amortization for fiscal 2014, 2015, 2016, 2017 and 2018 will be approximately $89 million, $81 million, $76 million, $67 million and $58 million per year, respectively.

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 Company’s warranty provisions are adjusted as necessary. 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.

The Company’s product warranty liability is recorded in the consolidated statements 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 Company’s total product warranty liability for the six months ended March 31, 2013 and 2012 were as follows (in millions):

 
Six Months Ended March 31,
 
2013
 
2012
Balance at beginning of period
$
278

 
$
301

Accruals for warranties issued during the period
126

 
97

Accruals from acquisitions and divestitures
—

 
(1
)
Accruals related to pre-existing warranties (including changes in estimates)
(7
)
 
(17
)
Settlements made (in cash or in kind) during the period
(137
)
 
(84
)
Currency translation
(2
)
 
(1
)
Balance at end of period
$
258

 
$
295



13

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

8.
Significant Restructuring Costs

To better align its resources with its growth strategies and reduce the cost structure of its global operations to address the softness in certain underlying markets, the Company committed to a significant restructuring plan in the third and fourth quarters of fiscal 2012 and recorded $297 million of restructuring costs, of which $52 million was recorded in the third quarter and $245 million was recorded in the fourth quarter of fiscal 2012. As a continuation of its restructuring plan, the Company recorded $84 million of significant restructuring costs primarily for the Automotive Experience Interiors segment in the second quarter of fiscal 2013. The restructuring actions related to cost reduction initiatives in the Company’s Automotive Experience, Building Efficiency and Power Solutions businesses and included planned workforce reductions and plant closures. The restructuring actions are expected to be substantially complete by the end of fiscal 2014.

The following table summarizes the changes in the Company’s restructuring reserve, included within other current liabilities in the consolidated statements of financial position (in millions):
 
Employee Severance and Termination Benefits
 
Fixed Asset Impairments
 
Other
 
Currency
Translation
 
Total
Balance at September 30, 2012
$
221

 
$
—

 
$
7

 
$
—

 
$
228

Utilized—cash
(27
)
 
—

 
(3
)
 
—

 
(30
)
Utilized—noncash
—

 
—

 
—

 
2

 
2

Balance at December 31, 2012
$
194

 
$
—

 
$
4

 
$
2

 
$
200

Additional restructuring costs
71

 
13

 
—

 
—

 
84

Utilized—cash
(31
)
 
—

 
—

 
—

 
(31
)
Utilized—noncash
—

 
(13
)
 
(4
)
 
(3
)
 
(20
)
Balance at March 31, 2013
$
234

 
$
—

 
$
—

 
$
(1
)
 
$
233


The Company's restructuring plans include workforce reductions of approximately 8,600 employees (6,200 for the Automotive Experience business, 1,700 for the Building Efficiency business and 700 for the Power Solutions business). Restructuring charges associated with employee severance and termination benefits are paid over the severance period granted to each employee or on a lump sum basis in accordance with individual severance agreements. As of March 31, 2013, approximately 3,300 of the employees have been separated from the Company pursuant to the restructuring plans. In addition, the restructuring plans include thirteen plant closures (ten for Automotive Experience, two for Power Solutions and one for Building Efficiency). As of March 31, 2013, three of the thirteen plants have been closed.

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 Company’s liquidity position, lead to impairment charges and/or require additional restructuring of its operations.


14

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

9.
Income Taxes

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. For the three and six months ended March 31, 2013, the Company's effective tax rate was 55% and 36%, respectively. This was greater than the U.S. federal statutory rate of 35% due to valuation allowance adjustments, an uncertain tax position charge and significant restructuring costs, partially offset by foreign tax rate differentials. For the three and six months ended March 31, 2012, the Company's effective tax rate of 20% was lower than the U.S. federal statutory rate of 35% primarily due to foreign tax rate differentials.

Valuation Allowance

The Company reviews the realizability of its deferred tax assets 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 are considered, along with any other positive or negative evidence. Since future financial results may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.

In the second quarter of fiscal 2013, the Company performed an analysis of its worldwide deferred tax assets. 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 a portion of the deferred tax assets would not be utilized in Brazil and Germany. Therefore, the Company recorded $94 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.

Given the current economic uncertainty, it is reasonably possible that over the next twelve months, valuation allowances against deferred tax assets in certain jurisdictions may result in a net increase to income tax expense of up to $250 million.

Uncertain Tax Positions

At September 30, 2012, the Company had gross tax effected unrecognized tax benefits of $1,465 million of which $1,274 million, if recognized, would impact the effective tax rate. Total net accrued interest at September 30, 2012 was approximately $72 million (net of tax benefit). The net change in interest and penalties during the six months ended March 31, 2013 was $7 million, and for the same period in fiscal 2012 was $9 million. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

As a result of foreign law changes during the second quarter of fiscal 2013, the Company increased its total reserve for uncertain tax positions, resulting in income tax expense of $17 million.















15

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

In the U.S., fiscal years 2007 through 2009 are currently under exam by the Internal Revenue Service (IRS) and fiscal years 2004 through 2006 are currently under IRS Appeals. Additionally, the Company is currently under exam in the following major foreign jurisdictions:

Tax Jurisdiction
Tax Years Covered
 
 
Belgium
2010 - 2011
Brazil
2004 - 2008
Canada
2007 - 2010
France
2002 - 2010
Germany
2001 - 2010
Italy
2005 - 2009, 2011
Japan
2010 - 2012
Korea
2008 - 2012
Mexico
2003 - 2004, 2008 - 2011
Poland
2008 - 2010
Slovakia
2009 - 2010

The Company expects that certain tax examinations, appellate proceedings and/or tax litigation will conclude within the next twelve months, the impact of which could be up to a $200 million benefit to income tax expense.

Impacts of Tax Legislation

As a result of foreign law changes during the second quarter of fiscal 2013, the Company increased its total reserve for uncertain tax positions, resulting in income tax expense of $17 million.

The "look-through rule," under subpart F of the U.S. Internal Revenue Code, expired for the Company on September 30, 2012. The "look-through rule" had provided an exception to the U.S. taxation of certain income generated by foreign subsidiaries. The rule was extended in January 2013 retroactive to the beginning of the Company's 2013 fiscal year.

During the six month period ended March 31, 2012, tax legislation was adopted in Japan which reduced its income tax rate by 5%. Also, tax legislation was adopted in various jurisdictions to limit the annual utilization of tax losses that are carried forward. These law changes did not have a material impact on the Company’s consolidated financial statements.


16

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

10.
Pension and Postretirement Plans

As discussed in Note 1, “Financial Statements,” of the notes to consolidated financial statements, the Company elected to change its policy for recognizing pension and postretirement benefit expenses in the fourth quarter of fiscal 2012. This change in accounting policy has been applied retrospectively, revising all periods presented.

The components of the Company’s net periodic benefit costs associated with its defined benefit pension and postretirement plans are shown in the tables below in accordance with ASC 715, “Compensation – Retirement Benefits” (in millions):

 
U.S. Pension Plans
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2013
 
2012
 
2013
 
2012
Service cost
$
22

 
$
17

 
$
45

 
$
34

Interest cost
37

 
37

 
75

 
75

Expected return on plan assets
(58
)
 
(52
)
 
(116
)
 
(106
)
Amortization of prior service cost
1

 
1

 
1

 
1

Net periodic benefit cost
$
2

 
$
3

 
$
5

 
$
4

 
Non-U.S. Pension Plans
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2013

2012
 
2013

2012
Service cost
$
9

 
$
8

 
$
19

 
$
17

Interest cost
16

 
18

 
32

 
36

Expected return on plan assets
(17
)
 
(19
)
 
(35
)
 
(37
)
Amortization of prior service credit
(1
)
 
(1
)
 
(1
)
 
(1
)
Curtailment gain
(2
)
 
—

 
(26
)
 
—

Net periodic benefit cost (credit)
$
5


$
6


$
(11
)

$
15

 
Postretirement Benefits
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2013
 
2012
 
2013
 
2012
Service cost
$
2

 
$
1

 
$
3

 
$
2

Interest cost
2

 
4

 
5

 
7

Expected return on plan assets
(3
)
 
(3
)
 
(6
)
 
(6
)
Amortization of prior service credit
(5
)
 
(5
)
 
(9
)
 
(9
)
Net periodic benefit credit
$
(4
)
 
$
(3
)
 
$
(7
)
 
$
(6
)

The curtailment gains in the three and six months ended March 31, 2013 were the result of a lost contract in the Global Workplace Solutions segment.


17

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

11.
Debt and Financing Arrangements

During the quarter ended December 31, 2012, a $35 million and a $100 million committed revolving credit facility expired. The Company entered into a new $35 million committed revolving credit facility scheduled to expire in November 2013 and a new $100 million committed revolving credit facility scheduled to expire in December 2013. As of March 31, 2013, there were no draws on either facility.

During the quarter ended December 31, 2012, the Company entered into a five-year, 70 million euro, floating rate credit facility scheduled to mature in fiscal 2018. The Company drew on the credit facility during the quarter ended December 31, 2012. Proceeds from the facility were used for general corporate purposes.

During the quarter ended December 31, 2012, the Company retired $100 million in principal amount, plus accrued interest, of its 5.8% fixed rate notes that matured November 2012. The Company used cash to fund the payment.

During the quarter ended March 31, 2012, the Company remarketed $46 million aggregate principal amount of 11.5% subordinated notes due in fiscal 2042, on behalf of holders of Corporate Units and holders of separate notes, by issuing $46 million aggregate principal amount of 2.355% senior notes due on March 31, 2017.

During the quarter ended December 31, 2011, the Company issued $400 million aggregate principal amount of 2.6% senior unsecured fixed rate notes due in fiscal 2017, $450 million aggregate principal amount of 3.75% senior unsecured fixed rate notes due in fiscal 2022 and $250 million aggregate principal amount of 5.25% senior unsecured fixed rate notes due in fiscal 2042. Aggregate net proceeds of $1.1 billion from the issuances were used for general corporate purposes, including the retirement of short-term debt and contributions to the Company’s pension and postretirement plans.

During the quarter ended December 31, 2011, the Company entered into a five-year, 75 million euro, floating rate credit facility scheduled to mature in fiscal 2017. The Company drew on the credit facility during the quarter ended March 31, 2012. Proceeds from the facility were used for general corporate purposes.

Net Financing Charges

The Company's net financing charges line item in the consolidated statements of income for the three and six month periods ended March 31, 2013 and 2012 contained the following components (in millions):

 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
Interest expense, net of capitalized interest costs
$
69

 
$
62

 
$
129

 
$
111

Banking fees and bond cost amortization
5

 
7

 
10

 
14

Interest income
(3
)
 
(4
)
 
(7
)
 
(7
)
Net foreign exchange results for financing activities
(5
)
 
(2
)
 
(5
)
 
(6
)
Net financing charges
$
66

 
$
63

 
$
127

 
$
112



18

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

12.
Earnings Per Share

The Company presents both basic and diluted earnings per share (EPS) amounts. Basic EPS is calculated by dividing net income attributable to Johnson Controls, Inc. by the weighted average number of common shares outstanding during the reporting period. Diluted EPS is calculated by dividing net income attributable to Johnson Controls, Inc. 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 and unvested restricted stock. The treasury stock method assumes that the Company uses the proceeds from the exercise of stock option 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 capital in excess of par value when the award generates a tax deduction. If there would be a shortfall resulting in a charge to capital in excess of par value, such an amount would be a reduction of the proceeds. For unvested restricted stock, assumed proceeds under the treasury stock method would include unamortized compensation cost and windfall tax benefits or shortfalls.

The Company’s outstanding Equity Units due 2042 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 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 March 31,
 
Six Months Ended March 31,
 
2013
 
2012
 
2013
 
2012
Income Available to Common Shareholders
 
 
 
 
 
 
 
Basic income available to common shareholders
$
148

 
$
379

 
$
502

 
$
803

Interest expense, net of tax
—

 
—

 
—

 
1

Diluted income available to common shareholders
$
148

 
$
379

 
$
502

 
$
804

 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding
 
 
 
 
 
 
 
Basic weighted average shares outstanding
684.0

 
680.0

 
683.6

 
679.9

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options and unvested restricted stock
5.4

 
6.2

 
4.4

 
5.9

Equity units
—

 
3.7

 
—

 
3.7

Diluted weighted average shares outstanding
689.4

 
689.9

 
688.0

 
689.5

 
 
 
 
 
 
 
 
Antidilutive Securities
 
 
 
 
 
 
 
Options to purchase common shares
0.5

 
0.7

 
1.6

 
1.1


During the three months ended March 31, 2013 and 2012, the Company declared a dividend of $0.19 and $0.18, respectively, per common share. During the six months ended March 31, 2013 and 2012, the Company declared two quarterly dividends totaling $0.38 and $0.36, respectively, per common share. With the exception of the quarterly dividend declared and paid in the three months ended December 31, 2012, the Company paid all dividends in the month subsequent to the end of each fiscal quarter.



19

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

13.
Equity and Noncontrolling Interests

The following schedules present changes in consolidated equity attributable to Johnson Controls, Inc. and noncontrolling interests (in millions):

 
Three Months Ended March 31, 2013
 
Three Months Ended March 31, 2012
 
Equity
Attributable to
Johnson
Controls, Inc.
 
Equity
Attributable to
Noncontrolling
Interests
 
Total Equity
 
Equity
Attributable to
Johnson
Controls, Inc.
 
Equity
Attributable to
Noncontrolling
Interests
 
Total Equity
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance, December 31
$
11,858

 
$
155

 
$
12,013

 
$
11,137

 
$
141

 
$
11,278

Total comprehensive income:

 

 
 
 

 

 
 
Net income
148

 
17

 
165

 
379

 
13

 
392

Foreign currency translation adjustments
(180
)
 
1

 
(179
)
 
175

 
(2
)
 
173

Realized and unrealized gains (losses) on derivatives
(7
)
 
—

 
(7
)
 
19

 
—

 
19

Unrealized gains on marketable common stock
3

 
—

 
3

 
11

 
—

 
11

Pension and postretirement plans
(3
)
 
—

 
(3
)
 
(3
)
 
—

 
(3
)
Other comprehensive income (loss)
(187
)
 
1

 
(186
)
 
202

 
(2
)
 
200

Comprehensive income (loss)
(39
)
 
18

 
(21
)
 
581

 
11

 
592

 
 
 
 
 
 
 
 
 
 
 
 
Other changes in equity:
 
 
 
 
 
 
 
 
 
 
 
Cash dividends—common stock
(130
)
 
—

 
(130
)
 
(123
)
 
—

 
(123
)
Dividends attributable to noncontrolling interests
—

 
(9
)
 
(9
)
 
—

 
(6
)
 
(6
)
Redemption value adjustment attributable to redeemable noncontrolling interests
61

 
—

 
61

 
6

 
—

 
6

Repurchases of common stock
(50
)
 
—

 
(50
)
 
(33
)
 
—

 
(33
)
Change in noncontrolling interest share
—

 
70

 
70

 
—

 
4

 
4

Other, including options exercised
98

 
—

 
98

 
27

 
—

 
27

Ending balance, March 31
$
11,798

 
$
234

 
$
12,032

 
$
11,595

 
$
150

 
$
11,745


20

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

 
Six Months Ended March 31, 2013
 
Six Months Ended March 31, 2012
 
Equity
Attributable to
Johnson
Controls, Inc.
 
Equity
Attributable to
Noncontrolling
Interests
 
Total Equity
 
Equity
Attributable to
Johnson
Controls, Inc.
 
Equity
Attributable to
Noncontrolling
Interests
 
Total Equity
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance, September 30
$
11,555

 
$
148

 
$
11,703

 
$
11,042

 
$
138

 
$
11,180

Total comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
Net income
502

 
28

 
530

 
803

 
28

 
831

Foreign currency translation adjustments
(136
)
 
—

 
(136
)
 
(53
)
 
(1
)
 
(54
)
Realized and unrealized gains (losses) on derivatives
(8
)
 
—

 
(8
)
 
29

 
—

 
29

Unrealized gains on marketable common stock
6

 
—

 
6

 
8

 
—

 
8

Pension and postretirement plans
(12
)
 
—

 
(12
)
 
—

 
—

 
—

Other comprehensive income (loss)
(150
)
 
—

 
(150
)
 
(16
)
 
(1
)
 
(17
)
Comprehensive income
352

 
28

 
380

 
787

 
27

 
814

 
 
 
 
 
 
 
 
 
 
 
 
Other changes in equity:
 
 
 
 
 
 
 
 
 
 
 
Cash dividends—common stock
(260
)
 
—

 
(260
)
 
(246
)
 
—

 
(246
)
Dividends attributable to noncontrolling interests
—

 
(12
)
 
(12
)
 
—

 
(15
)
 
(15
)
Redemption value adjustment attributable to redeemable noncontrolling interests
63

 
—

 
63

 
1

 
—

 
1

Repurchases of common stock
(50
)
 
—

 
(50
)
 
(33
)
 
—

 
(33
)
Change in noncontrolling interest share
—

 
70

 
70

 
—

 
—

 
—

Other, including options exercised
138

 
—

 
138

 
44

 
—

 
44

Ending balance, March 31
$
11,798

 
$
234

 
$
12,032

 
$
11,595

 
$
150

 
$
11,745


The Company consolidates certain subsidiaries in which the noncontrolling interest party has within their control the right to require the Company to redeem all or a portion of its interest in the subsidiary. The redeemable noncontrolling interests are reported at their estimated redemption value. Any adjustment to the redemption value impacts retained earnings but does not impact net income. Redeemable noncontrolling interests which are redeemable only upon future events, the occurrence of which is not currently probable, are recorded at carrying value.

The following schedules present changes in the redeemable noncontrolling interests (in millions):

 
Three Months Ended
March 31, 2013
 
Three Months Ended
March 31, 2012
 
 
 
 
Beginning balance, December 31
$
270

 
$
282

Net income
13

 
25

Foreign currency translation adjustments
—

 
1

Dividends
(6
)
 
(1
)
Redemption value adjustment
(61
)
 
(6
)
Change in noncontrolling interest share
(11
)
 
17

Ending balance, March 31
$
205

 
$
318


21

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

 
Six Months Ended
March 31, 2013
 
Six Months Ended
March 31, 2012
 
 
 
 
Beginning balance, September 30
$
253

 
$
260

Net income
32

 
45

Dividends
(6
)
 
(9
)
Redemption value adjustment
(63
)
 
(1
)
Change in noncontrolling interest share
(11
)
 
23

Ending balance, March 31
$
205

 
$
318


The following schedules present changes in accumulated other comprehensive income (AOCI) attributable to Johnson Controls, Inc. (in millions, net of tax):

 
Three Months  Ended
March 31, 2013
 
Three Months  Ended
March 31, 2012
 
 
 
 
Foreign currency translation adjustments
 
 
 
Balance at beginning of period
$
457

 
$
406

Aggregate adjustment for the period (net of tax effect of $12 and $12)
(180
)
 
175

Balance at end of period
277

 
581

 
 
 
 
Realized and unrealized gains (losses) on derivatives
 
 
 
Balance at beginning of period
11

 
(17
)
Current period changes in fair value (net of tax effect of $3 and $10)
(4
)
 
15

Reclassification to income (net of tax effect of $2 and $2) *
(3
)
 
4

Balance at end of period
4

 
2

 
 
 
 
Unrealized gains on marketable common stock
 
 
 
Balance at beginning of period
8

 
3

Current period changes in fair value (net of tax effect of $0)
3

 
—

Reclassification to income (net of tax effect of $0) **
—

 
11

Balance at end of period
11

 
14

 
 
 
 
Pension and postretirement plans
 
 
 
Balance at beginning of period
19

 
39

Reclassification to income (net of tax effect of $2 and $2) ***
(3
)
 
(3
)
Balance at end of period
16

 
36

 
 
 
 
Accumulated other comprehensive income, end of period
$
308

 
$
633


22

Johnson Controls, Inc.
Notes to Consolidated Financial Statements
March 31, 2013
(unaudited)

 
Six Months Ended
March 31, 2013
 
Six Months Ended
March 31, 2012
 
 
 
 
Foreign currency translation adjustments