SEC Comment Letter for JOHNSON CONTROLS INC (CIK 0000053669) — Aug 1, 2005
JOHNSON CONTROLS INC (CIK 0000053669)
Date: Aug. 1, 2005 · CIK: 0000053669 · Accession: 0000000000-05-039342
AI Filing Summary & Sentiment
Referenced dates: July 18, 2005
Letter
July 29, 2005 By U.S. mail and facsimile to (414) 524-3232 R. Bruce McDonald Vice President and Chief Financial Officer Johnson Controls, Inc. 5757 N. Green Bay Avenue Milwaukee, WI 53201
Re: Johnson Controls, Inc. Form 10-Q for the period ended March 31, 2005 Filed May 6, 2005 File No. 1-5097
Dear Mr. McDonald:
We have reviewed your response letter dated July 18, 2005 and have the following additional comments. If you disagree, we will consider your explanation as to why our comment is inapplicable. In some of our comments, we may ask you to provide us with supplemental information so we may better understand your disclosure. After reviewing this information, we may or may not raise additional comments.
Form 10-Q for the period ended March 31, 2005
Prior Comments 4 and 5
1. It does not appear that the $11.5 million and $69 million tax benefits recognized in the 12/31/04 and 3/31/05 quarters, respectively, are changes in tax status as contemplated by paragraphs 28 and 112 of SFAS 109. Instead, it appears that these benefits have arisen from tax planning strategies and not from changes in tax laws or tax rates. If this understanding is not correct then please clarify the issue in a letter of supplemental information. Otherwise, the description of these tax benefits should be clarified in your filings.
Tax planning strategies are specifically addressed in paragraphs and 23 of SFAS 109 as a factor to consider when determining the amount of deferred tax asset valuation allowances required. It appears that you may use German and French NOL`s as ordinary tax deductions for US income tax purposes. Therefore, it is not clear why a full valuation allowance is recorded against these tax assets at 3/31/05. In this regard, we note the consistent history of substantial taxable income and the Registrant`s positive forecasts of future sales and earnings. Please
clarify this issue in a letter of supplemental information. This apparent inconsistency should also be clarified in the critical accounting policy section of your filings.
Prior Comment 8
2. Please ensure that the revised disclosures specifically address the negative trend in consolidated gross margin over the past 8 fiscal quarters. Disclose whether this trend is expected to continue and the specific competitive and business factors that constrain management`s ability to reverse this trend. Relevant factors could also include: the remaining duration of material long term pricing agreements; the strategies being used to manage your exposure to the rising raw materials prices; and whether you are able to secure long-term raw materials pricing arrangements to match your obligations under the long term pricing agreements with your customers.
It is our understanding that the decrease in gross margin you are experiencing is the result of a decline in sales prices and an increase in raw materials prices. Note that Item 303(a)(3)(ii) and (iii) of Regulation S-K requires you to disclose the extent to which sales variances were impacted by price changes. This impact should be quantified in MD&A given your assertion that the impact has been material. This is also necessary to a reader`s understanding of whether the material decline in gross margin is primarily attributable to the price changes or to the increases in raw materials costs.
* * * *
Please respond to these comments within 10 business days or tell us when you will provide us with a response. Please furnish a letter that keys your responses to our comments and provides any requested supplemental information. Detailed response letters greatly facilitate our review. Please file your response letter on EDGAR as a correspondence file. We may raise additional comments after we review your responses.
You may contact Jenn Do at (202) 551-3743, Al Pavot at (202) 551-3738 or me at (202) 551-3255 if you have questions regarding these comments.
Sincerely,
Nili Shah
Branch Chief
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Show Raw Text
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<FILENAME>filename1.txt
<TEXT>
July 29, 2005
By U.S. mail and facsimile to (414) 524-3232
R. Bruce McDonald
Vice President and Chief Financial Officer
Johnson Controls, Inc.
5757 N. Green Bay Avenue
Milwaukee, WI 53201
Re: Johnson Controls, Inc.
Form 10-Q for the period ended March 31, 2005
Filed May 6, 2005
File No. 1-5097
Dear Mr. McDonald:
We have reviewed your response letter dated July 18, 2005
and
have the following additional comments. If you disagree, we will
consider your explanation as to why our comment is inapplicable.
In
some of our comments, we may ask you to provide us with
supplemental
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Form 10-Q for the period ended March 31, 2005
Prior Comments 4 and 5
1. It does not appear that the $11.5 million and $69 million tax
benefits recognized in the 12/31/04 and 3/31/05 quarters,
respectively, are changes in tax status as contemplated by
paragraphs
28 and 112 of SFAS 109. Instead, it appears that these benefits
have
arisen from tax planning strategies and not from changes in tax
laws
or tax rates. If this understanding is not correct then please
clarify
the issue in a letter of supplemental information. Otherwise, the
description of these tax benefits should be clarified in your
filings.
Tax planning strategies are specifically addressed in paragraphs
22
and 23 of SFAS 109 as a factor to consider when determining the
amount
of deferred tax asset valuation allowances required. It appears
that
you may use German and French NOL`s as ordinary tax deductions for
US
income tax purposes. Therefore, it is not clear why a full
valuation
allowance is recorded against these tax assets at 3/31/05. In this
regard, we note the consistent history of substantial taxable
income
and the Registrant`s positive forecasts of future sales and
earnings.
Please
clarify this issue in a letter of supplemental information. This
apparent inconsistency should also be clarified in the critical
accounting policy section of your filings.
Prior Comment 8
2. Please ensure that the revised disclosures specifically
address
the negative trend in consolidated gross margin over the past 8
fiscal
quarters. Disclose whether this trend is expected to continue and
the
specific competitive and business factors that constrain
management`s
ability to reverse this trend. Relevant factors could also
include:
the remaining duration of material long term pricing agreements;
the
strategies being used to manage your exposure to the rising raw
materials prices; and whether you are able to secure long-term raw
materials pricing arrangements to match your obligations under the
long term pricing agreements with your customers.
It is our understanding that the decrease in gross margin you are
experiencing is the result of a decline in sales prices and an
increase in raw materials prices. Note that Item 303(a)(3)(ii) and
(iii) of Regulation S-K requires you to disclose the extent to
which
sales variances were impacted by price changes. This impact should
be
quantified in MD&A given your assertion that the impact has been
material. This is also necessary to a reader`s understanding of
whether the material decline in gross margin is primarily
attributable
to the price changes or to the increases in raw materials costs.
* * * *
Please respond to these comments within 10 business days or
tell
us when you will provide us with a response. Please furnish a
letter
that keys your responses to our comments and provides any
requested
supplemental information. Detailed response letters greatly
facilitate our review. Please file your response letter on EDGAR
as a
correspondence file. We may raise additional comments after we
review
your responses.
You may contact Jenn Do at (202) 551-3743, Al Pavot at (202)
551-3738 or me at (202) 551-3255 if you have questions regarding
these
comments.
Sincerely,
Nili Shah
Branch Chief
??
??
??
??
Mr. R. Bruce McDonald
Johnson Controls, Inc.
July 29, 2005
Page 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE
</TEXT>
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