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Johnson Controls $150 Million Notes Rated 'A' By Fitch

14 July 1997

Johnson Controls $150 Million Notes Rated 'A' By Fitch - Fitch Financial Wire -

    NEW YORK, July 14 -- Johnson Controls Inc.'s (JCI)
$150 million 7 1/8 notes, due July 15, 2017, are rated "A" by Fitch. In
addition, JCI's senior debt, medium-term notes and shelf registration are
affirmed at "A" and its commercial paper at "F-1". The new issue was sold
pursuant to
the company's shelf registration, on which $1.35 billion remains. JCI will use
the proceeds to refinance part of the short-term debt incurred to finance the
acquisition of Prince Holding Corp. on Oct. 1, 1996.
    The rating reflects the company's strong and growing global market
positions in its major businesses, consistent free cash flow generation,
efficient working capital management and proven ability to finance and
integrate acquisitions.
    In the past eighteen months, JCI fortified its position as a Tier I
supplier to vehicle passenger cabins with two major acquisitions, which have
contributed immediately to cash flow. While initial debt financing of these
temporarily weakened credit protection indicators, the company has made
strides in restoring them to levels more directionally consistent with the
current ratings. Total debt peaked at $2.3 billion at Dec. 31, 1996, with
debt/EBITDA, Fitch's measure of leverage, at 2.62 times (x). By March 31,
1996, JCI reduced total debt to $1.7 billion, with $645 million of
proceeds from the sale of its plastics container business, and debt/EBITDA
fell to 1.86x. Fitch anticipates additional improvement in credit protection,
as cash flow growth from the core businesses and acquisitions more than
replaces that from the divested business. Fitch expects credit protection
measures to return to levels consistent with the current rating in a
reasonable period, given JCI's demonstrated ability in managing acquisition
debt.
    JCI's facilities management and automotive businesses continue to benefit
from corporate outsourcing. However, growth, margin improvement and market
share gains in the automotive business must come from productivity gains and
new products and services, as pricing flexibility is limited. While JCI
continues to follow customers as they globalize their own operations, startup
costs associated with expanding its global footprint will continue to
constrain margin expansion over the near term. The company's battery business
is growing again, with margin improvements following cost reductions and the
capture of the DieHard Gold business from Sears. With automotive capacity
expansions abating, capital spending is declining from its peak 1995 level and
is forecast at a reasonable $375-$400 million in fiscal 1997.
    JCI, headquartered in Milwaukee, WI, has three business: automotive
seating and components, facility services and control systems, and automotive
batteries.

SOURCE  Fitch Investors Service