UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Commission File Number 1-5097

JOHNSON CONTROLS, INC.

5757 North Green Bay Avenue, P.O. Box 591, Milwaukee, WI 53201

Registrant’s telephone number, including area code: (414) 524-1200

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   X   No      

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes   X   No      

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

JOHNSON CONTROLS, INC.

FORM 10-Q

June 30, 2004

REPORT INDEX

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PART I. — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

JOHNSON CONTROLS, INC.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

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

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JOHNSON CONTROLS, INC.

CONSOLIDATED STATEMENT OF INCOME

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

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JOHNSON CONTROLS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

See Note 5 for discussion of goodwill from business acquisitions in fiscal 2004.

The Company’s other intangible assets, primarily from business acquisitions, are valued based on independent appraisals and consisted of:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders
of Johnson Controls, Inc.

We have reviewed the accompanying condensed consolidated statements of financial position of Johnson Controls, Inc. and its subsidiaries as of June 30, 2004 and 2003, and the related consolidated statements of income and cash flows for each of the three- and nine-month periods ended June 30, 2004 and 2003. These interim financial statements are the responsibility of the Company’s 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, 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 consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We 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, 2003, 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 October 21, 2003 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of September 30, 2003, 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
August 5, 2004

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Three-Month Periods ended June 30, 2004 and June 30, 2003

Sales

The Company’s net sales for the three-month periods ended June 30, 2004 and 2003 were as follows:

Consolidated net sales in the three-month period ended June 30, 2004 grew to $6.8 billion, 14% above the comparable period in the prior year. Excluding the effects of currency translation, current quarter sales rose 11%. The growth reflects an increase in market share achieved by both the Automotive Group and the Controls Group.

Automotive Group
Sales in the third quarter of fiscal 2004 rose 16% over the prior year period, reaching $5.3 billion. Excluding the impact of currency translation, segment sales were up 13%.

The segment’s North American sales increased 7% over the prior year period. Interior systems sales in North America grew 7%, compared with only a slight increase in North American light vehicle production in the period. The Company’s growth in comparison to the industry production reflects involvement with popular platforms and new interior systems business. Battery sales in North America were up 10%. While unit shipments of automotive batteries approximated the prior year level, sales were above the prior year due to pass-through pricing of higher lead costs in the current quarter.

European segment sales rose 28% from the comparable prior year period. Interior systems sales, excluding the impact of currency translation and acquisitions, grew 19% above an estimated slight increase in European light vehicle production. The favorable performance reflects the launch of new business and the Company’s involvement in platforms where demand year-over-year was above the industry average. European battery sales, excluding the impact of currency translation, were up 18% over the prior year period largely due to an 8% increase in unit shipments in comparison to the prior year.

Segment sales in Asia and South America, which represent less than 10% of total segment sales, were higher primarily reflecting increased volumes in the Pacific Rim and South America.

Controls Group
Third quarter sales of $1.5 billion were 7% above the prior year period. Excluding the impact of currency translation, Controls Group sales grew 5%.

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Sales in North America were up 5% over the prior year period, primarily the result of a 5-10% increase in service sales. Lower facility management service activity with the federal government was outweighed by new commercial facility management business. Sales of installed systems to the construction market were higher in the current quarter but were slightly offset by lower systems renovation work.

European sales, excluding the impact of currency translation, increased 5% above the prior year. While all lines of business contributed to the growth, sales of installed systems to the construction market were quite strong, despite the region’s weak new construction market .

Sales in the Asian markets, which represent less than 10% of segment revenue, were higher in comparison to the prior year, due to increased installed systems activity in Japan, additional technical service business in the Pacific Rim and the positive impact of foreign currency translation.

Operating Income

The Company’s operating income for the three-month periods ended June 30, 2004 and 2003 was as follows:

Automotive Group
Automotive Group operating income in the third quarter was $286 million, an increase of 18% over the prior year period. The segment’s gross profit in North America was comparable to the prior year quarter reflecting lower volumes of the Company’s more mature vehicle programs combined with increased launch costs and higher steel costs. Lead pass-through price increases combined with operational efficiencies in the North American automotive battery business offset the higher lead costs in the current quarter. Gross profit in Europe was up considerably over the prior year quarter, largely attributable to performance improvements within the interior systems business. Additional benefits were from higher volumes of both interior systems and automotive batteries and continued integration savings resulting from the consolidation of the Company’s two recently acquired German battery companies. These benefits were partially offset by higher launch costs associated with the execution of new interior systems business and higher lead costs. Selling, general and administrative (SG&A) expenses in the quarter were up mainly due to lower engineering recoveries in North America, increased pension and health care costs and the impact of currency translation.

Controls Group
Operating income was $78 million in the third quarter of fiscal 2004, 8% above the prior year period. Gross profit in North America was comparable to the prior year quarter. The benefits of higher volumes and new commercial facility management contracts in the current period were virtually offset by lower gross margin percentages associated with the installed systems business reflecting a competitive new construction environment. European gross profit was up over the prior year period primarily reflecting higher

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volumes in the installed systems and technical service lines of business. SG&A expenses in the current quarter were comparable with the prior year period despite higher pension and health care costs and the impact of currency translation.

Other Income/Expense

Net interest expense in the third quarter of fiscal 2004 was approximately $2 million lower year-over-year primarily due to a higher level of capitalized interest in the current period due to a higher level of capital spending. Equity income in the third quarter of the current year was approximately $4 million above the prior year quarter, reflecting growth in the Automotive Group’s North American and Chinese joint ventures. In addition, the Company received approximately $36 million of dividends from its Automotive Chinese joint ventures in the current quarter. Miscellaneous — net expense in the current quarter was approximately $10 million above the prior year period. The increase primarily reflects approximately $6 million of expense associated with the bond redemption (see Note 18) and higher net currency losses in the current quarter in contrast to the prior year period.

Provision for Income Taxes

The Company’s effective income tax rate for the third quarter of fiscal 2004 was 29.0% compared with 31.0% for the prior year period. The decrease was due to global tax planning initiatives.

Minority Interests in Net Earnings of Subsidiaries

Minority interests in net earnings of subsidiaries in the third quarter of fiscal 2004 were approximately $5 million above the prior year, mainly due to higher earnings at certain Automotive Group joint ventures in North America.

Net Income

Net income for the three-month period ended June 30, 2004 was $222 million, 17% above the prior year. The increased earnings were a result of higher operating income, lower net interest expense, higher equity earnings and a lower effective income tax rate, partially offset by higher miscellaneous-net expenses and minority interests in net earnings of subsidiaries. Diluted earnings per share for the three months ended June 30, 2004 were $1.15, up 15% from $1.00 in the same period one year ago. The prior year per share amount has been restated to reflect a two-for-one stock split effective January 2, 2004 (see Note 17).

Comparison of Operating Results for the Nine-Month Periods ended June 30, 2004 and June 30, 2003

In the second quarter of fiscal 2004, the Company recorded an $84.4 million non-cash pension gain (see Note 15) within SG&A expenses in the Consolidated Statement of Income. Also included within SG&A expenses in the same quarter of the current year were $82.4 million of restructuring costs (see Note 13). Management’s evaluation of the performance of the Company’s segments excludes significant restructuring costs and other

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significant non-recurring gains or losses. As such, the restructuring costs and the pension gain were excluded from management’s evaluation of segment performance. Accordingly, the segment operating results for the nine-month period ended June 30, 2004 discussed below exclude the pension gain and restructuring costs recorded in the second quarter of fiscal 2004.

Sales

The Company’s net sales for the nine-month periods ended June 30, 2004 and 2003 were as follows:

Consolidated net sales in the first nine months of the current year were $19.8 billion, rising 19% above the comparable prior year period. Excluding the impact of currency translation, current year sales grew 13% above the prior year level.

Automotive Group
Sales reached $15.3 billion in the nine-month period ended June 30, 2004, a 22% increase above the prior year. Sales rose 14% excluding the impact of currency translation and acquisitions.

In North America, sales were up 13% over the same period one year ago. Despite the flat North American light vehicle production level in the period, sales of interior systems grew 14% above the prior year. The Company’s strong growth reflects a high level of new interior systems business with a variety of automakers and involvement in platforms whose production levels exceeded the industry average. Automotive battery sales in North America increased 8% over the prior year period reflecting increased market share, higher volumes and pass-through of the higher lead costs in the current quarter.

Excluding the impact of currency translation and acquisitions, European segment sales grew 17% over the prior year. Sales of interior systems increased 17%, surpassing the flat European light vehicle production in the period. Favorable platform mix, higher volumes and the launch of several new platforms were the main factors in the region’s favorable performance versus the industry production. European battery sales, excluding the impact of currency translation and acquisitions, increased 15% over the prior year period primarily due to a 20% increase in unit shipments year-over-year.

Sales in Asia and South America, which represent less than 10% of total segment revenues, were higher in comparison to the prior year period, principally the result of higher volumes in South America and new programs in the Pacific Rim.

Controls Group
Sales in the first nine months of fiscal 2004 were $4.4 billion, a growth of 10% over the prior year. Excluding the impact of currency translation, sales rose 5%.

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North American sales grew 8% over the first nine months of the prior year. Sales of installed systems were up 6%, with growth in both the construction and existing buildings markets. Sales of technical and facility management services were up 9% primarily driven by new contracts associated with the commercial facility management business.

European sales, excluding the impact of currency translation, were 1% above the same period one year ago. The increase principally represents growth of installed systems in the new construction market.

Sales in the Asian market, which represent less than 10% of segment revenue, were above the prior year, primarily due to increased facility management activities and the impact of foreign currency translation.

Operating Income

The Company’s operating income for the nine-month periods ended June 30, 2004 and 2003 was as follows:

Automotive Group
The Automotive segment’s operating income was $697 million in the nine-month period ending June 30, 2004, 14% above the prior year period. In North America, gross profit was approximately level with the prior year. The benefits of new interior systems business and favorable warranty experience and operating efficiencies achieved in the battery business were offset by lower production schedules for the Company’s more mature vehicle programs, increased launch costs and higher steel and lead costs. Gross profit in Europe was well above the prior year due to higher volumes of both interior systems and automotive batteries, performance improvements achieved by interior systems and the integration savings achieved within the battery business. These positives were partially offset by higher launch costs associated with the execution of new business and increased lead costs. The segment’s SG&A expenses were up over the prior year in virtually all regions due to higher engineering costs, increased pension and health care costs and the impact of currency translation.

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Controls Group
Operating income in the Controls Group for the first nine months of fiscal 2004 was $188 million, down 1% from the prior year. In North America, gross profit was up. The benefit from higher volumes across all lines of business and new facility management business was slightly offset by lower gross margin percentages in the installed systems business due to the competitive new construction environment. In Europe, gross profit, excluding the impact of currency translation, was comparable with the prior year. SG&A expenses were higher worldwide resulting from investments in sales force additions in the technical service business, increased pension and health care costs and the impact of currency translation.

Full Year Outlook

Management’s full-year consolidated sales outlook is estimated to be 14% to 16% over the prior year. For the Automotive Group, sales are expected to be 13% to 18% above the prior year. This outlook assumes North American and European light vehicle production levels will be flat to slightly higher in comparison to the prior year. Controls Group sales are projected to increase 10% to 12% above the prior year. The estimate anticipates double-digit growth in systems installation, technical services and facility management services in the commercial market through market share expansion.

The Company anticipates double-digit growth in consolidated operating income for 2004. For the Automotive Group, management expects the segment’s full-year operating margin percentage to be level to slightly lower than the prior year. The Company anticipates that the benefit of operating improvement initiatives in Europe will result in a significantly higher operating margin percentage of approximately three percent for the full year, excluding the impact of restructuring costs recorded in the second quarter of fiscal 2004. However, the segment’s operating margin is expected to be impacted by the stronger euro on consolidated margins and higher raw material costs. For the Controls Group, management expects operating margin as a percentage of sales to be slightly below the prior year level due to the impact of the stronger euro on consolidated margins and investments related to sales force additions in the technical service business.

Orders for installed control systems in the first nine months of the current year continue to be strongest from the domestic new construction and European existing buildings markets. Strong domestic new construction market sectors included education and health care.

The Controls Group backlog relates to its installed systems and technical service activity, accounted for using the percentage-of-completion method. At June 30, 2004, the unearned backlog to be executed within the next year was $1.843 billion, 4% above the prior year level of $1.778 billion.

Restructuring Costs

In the second quarter of fiscal 2004, the Company executed a restructuring plan involving cost structure improvement actions and recorded an $82.4 million restructuring charge within SG&A expenses in the Consolidated Statement of Income. These costs primarily relate to workforce reductions and plant consolidations. A significant portion of the Automotive Group actions are concentrated in Europe as the Company focuses on significantly improving profitability in the region in the future years. The Controls Group

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restructuring activities are split between North America and Europe. The majority of the actions are expected to be completed within one year. No further costs related to these specific actions are anticipated. The cost savings associated with these restructuring activities will be substantially offset by the costs of the Company’s ongoing cost reduction initiatives in the remainder of fiscal 2004.

Japanese Pension Settlement Gain

During the second quarter of fiscal 2004, the Company recorded a pension gain related to certain of the Company’s Japanese pension plans established under the Japanese Welfare Pension Insurance Law. In accordance with recent amendments to this law, the Company completed the transfer of certain pension obligations and related plan assets to the Japanese government which resulted in a non-cash settlement gain of $84.4 million, net of $1.2 million associated with the recognition of unrecognized actuarial losses, recorded within SG&A expenses in the Consolidated Statement of Income. The Company’s funded status of its non-U.S. pension plans increased $85.6 million as a result of the transfer of these pension obligations and related plan assets.

Other Income/Expense

Net interest expense in the first nine months of fiscal 2004 was down approximately $9 million from the prior year primarily due to higher levels of capitalized interest compared to the prior year and the current year’s lower interest rate environment. Management expects net interest expense for fiscal year 2004 to be between $105 and $110 million. Equity income for the nine months ended June 30, 2004 increased approximately $15 million year-over-year due to higher earnings at certain Automotive Group joint ventures in China resulting from strong revenue and earnings growth. Miscellaneous — net expense in the first nine months of fiscal 2004 increased approximately $22 million from the prior year period. The current year includes approximately $6 million of expense associated with the bond redemption in the third quarter of fiscal 2004 (see Note 18). Last year’s lower expense reflects a $17 million gain related to the conversion and subsequent disposition of the Company’s investment in Donnelly Corporation

Provision for Income Taxes

The Company’s effective income tax rate for the first nine months of fiscal 2004 was 26.9% compared with 31.0% for the prior year period. The decrease reflects global tax planning initiatives and a tax settlement of $17 million received in the first quarter related to prior periods (1991-1996). The Company anticipates the fiscal year 2004 effective tax rate to be 29.0% (excluding the tax benefit related to the first quarter’s favorable tax settlement) compared with 31.0% in fiscal year 2003 as a result of the Company’s continued success of global tax planning initiatives.

The Company’s Federal income tax returns and certain foreign income tax returns for fiscal years 1997-2001 are currently under various stages of audit by the Internal Revenue Service (IRS) and respective foreign tax authorities. Although the outcome of tax audits is always uncertain, management believes that its annual tax provisions include amounts sufficient to pay assessments, if any, that may be proposed by the taxing authorities. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the IRS may differ materially from the amounts accrued for each year. Company management expects that final resolution of these tax audits will occur over the next twelve months.

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Minority Interests in Net Earnings of Subsidiaries

Minority interests in net earnings of subsidiaries in the current year were approximately $12 million above the prior year, primarily due to higher earnings at certain Automotive Group joint ventures in North America. Management’s full-year estimate for minority interests in net earnings of subsidiaries is approximately $75 to $80 million. The increase is attributable to higher operating income anticipated at certain Automotive Group joint ventures.

Net Income

Net income for the nine months ended June 30, 2004 was $545 million, 18% above the prior year’s $463 million. The increased earnings were a result of higher operating and equity income, reduced net interest expense and a lower effective income tax rate partially offset by increased miscellaneous-net expenses and higher minority interests in net earnings of subsidiaries. Diluted earnings per share for the nine months ended June 30, 2004 were $2.83, up 16% from $2.44 in the comparable prior year period. The prior year per share amount has been restated to reflect a two-for-one stock split effective January 2, 2004 (see Note 17).

Comparison of Financial Condition

Working Capital and Cash Flow

Working capital, excluding cash and debt, of $454 million at June 30, 2004 was $24 million lower than fiscal year-end and $88 million higher than one year ago. The decrease from fiscal year-end reflects greater increases in accounts payable, accrued compensation and benefits and other current liabilities as well as a decrease in other current assets in comparison to the increases in accounts receivable and inventories from year-end. The increases in working capital, excluding cash and debt, from one year ago primarily relate to higher accounts receivable and lower other current liabilities partially offset by an increase in accounts payable.

Cash provided by operating activities was $446 million and $1.0 billion in the three- and nine-month periods ended June 30, 2004, respectively. In comparison to the three- and nine-month periods in the prior year, the current year amounts were $318 million and $653 million higher, respectively. The increases primarily relate to higher net income, the impact of a $250 million pension contribution in the third quarter of fiscal 2003 and favorable changes in working capital compared to the prior year periods.

The Company uses cross-currency interest rate swaps and foreign denominated debt to hedge portions of its net investments in foreign operations. Certain of these swaps were renewed at their current market rate during the first quarter of the current year, with the Company paying $143 million upon settlement. These payments are reflected as financing activities in the Consolidated Statement of Cash Flows.

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Capital Expenditures

In the third quarter of fiscal 2004, capital spending for property, plant and equipment was $188 million, an increase of $17 million from the comparable prior year period. For the nine months ended June 30, 2004, capital spending was $623 million, up $211 million from the prior year period. The higher spending in the current year was primarily due to the impact of currency translation, investments in current year launches and the timing of expenditures within the Automotive Group. Management’s full year estimate for capital expenditures is approximately $800 million.

Capitalization

Total capitalization of $7.2 billion at June 30, 2004 included short-term debt of $0.4 billion, long-term debt (including the current portion) of $1.9 billion and shareholders’ equity of $4.9 billion. The Company’s total capitalization was $6.6 million at both September 30, 2003 and June 30, 2003. Total debt as a percentage of total capitalization at June 30, 2004 was 32%, compared with 36% at fiscal year-end and 38% one year ago. The current year’s decrease in the ratio of debt-to-total capitalization primarily reflects working capital improvements compared with the prior year and the current year impact of the strengthening of the euro on shareholders’ equity.

On July 19, 2004, the Company announced that it will acquire 100% ownership of its battery joint venture with Grupo IMSA, S.A. de C.V. The Company will pay approximately $525 million, including the assumption of debt, for the remaining 51% interest in the joint venture. The transaction, which is subject to regulatory approvals, is expected to be completed in the fall of 2004. The investment is expected to be initially funded with short-term debt (see Note 20).

In December 2003 the Company filed a $1.5 billion universal shelf registration statement, under which the Company can issue a variety of debt and equity instruments, with the Securities and Exchange Commission effective March 26, 2004.

The Company is in compliance with all covenants and other requirements set forth in its credit agreements and indentures. The Company believes its capital resources and liquidity position at June 30, 2004 were adequate to meet projected needs. Requirements for working capital, capital expenditures, dividends and debt maturities will continue to be funded from operations, supplemented by short- and long-term borrowings, if required.

Guarantees and Off-Balance Sheet Arrangements

In the ordinary course of business, the Company utilizes accounts receivable factoring arrangements in countries where programs of this type are typical. Under these arrangements, the Company may sell certain of its trade accounts receivable to financial institutions. The arrangements, in virtually all cases, do not contain recourse provisions against the Company for its customers’ failure to pay. At June 30, 2004 and September 30, 2003 the Company had sold $155 million and $131 million, respectively, of foreign currency trade accounts receivable. The Company’s use of these arrangements has not been a material source of liquidity for the Company, and management does not consider these arrangements to be an important part of its future financing plans.

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Cautionary Statements for Forward-Looking Information

The Company has made forward-looking statements in this document that are subject to risks and uncertainties. Forward-looking statements include information concerning possible or assumed future risks and may include words such as “believes,” “expects,” “anticipates,” “projects” or similar expressions. For those statements, the Company cautions that numerous important factors, including industry vehicle production levels, U.S. dollar exchange rates and those discussed elsewhere in this document and in the Company’s Form 8-K filing (dated January 7, 2004), 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.

Other Financial Information

The interim financial information included in this 10-Q Report has not been audited by PricewaterhouseCoopers LLP (PwC). In reviewing such information, PwC has applied limited 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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For the nine-month period ended June 30, 2004, the Company did not experience any adverse changes in market risk exposures that materially affect the quantitative and qualitative disclosures presented in the Company’s Annual Report to Shareholders for the year ended September 30, 2003.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that such disclosure controls and procedures were effective in alerting them on a timely basis to material information relating to the Company required to be included in the Company’s periodic filings under the Exchange Act.

There have been no changes in the Company’s internal controls over financial reporting, or in factors that could significantly affect internal controls over financial reporting, subsequent to the date of the evaluation.

PART II. — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no significant changes in status since the last Report.

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company has entered into an Equity Swap Agreement, dated as of March 18, 2004 (the “Swap Agreement”), with Citibank, N.A. (“Citibank”). The Company selectively uses equity swaps to reduce market risk associated with its Company stock-based compensation plans, such as its deferred compensation plans and stock appreciation rights. Citibank has advised the Company that, in connection with the Swap Agreement, Citibank may purchase shares of the Company’s stock in the market or in privately negotiated transactions up to an amount equal to $135 million in aggregate cost at any given time. Citibank has also advised the Company that as of June 30, 2004 it has purchased shares of the Company’s stock in connection with the Swap Agreement. The Company is reporting those purchases in the table below, but in doing so 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 expiration date of the Swap Agreement is not currently determinable.

The table below presents information pursuant to Item 703(a) of Regulation S-K regarding the repurchase of the Company’s common stock by the Company and purchases of the Company’s common stock by Citibank in connection with the Swap Agreement during the three months ended June 30, 2004. The repurchases of the Company’s common stock by the Company relate solely to stock option and restricted stock transactions that are treated as involving repurchases of Company common stock for purposes of this disclosure.