Johnson Controls 2014 Annual Report Download - page 20

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(1) Leased facility
(2) Includes both leased and owned facilities
(3) Includes both administrative and manufacturing facilities
(4) Administrative facility only
In addition to the above listing, which identifies large properties (greater than 25,000 square feet), there are approximately 534
Building Efficiency branch offices and other administrative offices located in major cities throughout the world. These offices are
primarily leased facilities and vary in size in proportion to the volume of business in the particular locality.
ITEM 3 LEGAL PROCEEDINGS
As noted in Item 1, liabilities potentially arise globally under various environmental laws and worker safety laws for activities
that are not in compliance with such laws and for the cleanup of sites where Company-related substances have been released into
the environment.
Currently, the Company is responding to allegations that it is responsible for performing environmental remediation, or for the
repayment of costs spent by governmental entities or others performing remediation, at approximately 40 sites in the United States.
Many of these sites are landfills used by the Company in the past for the disposal of waste materials; others are secondary lead
smelters and lead recycling sites where the Company returned lead-containing materials for recycling; a few involve the cleanup
of Company manufacturing facilities; and the remaining fall into miscellaneous categories. The Company may face similar claims
of liability at additional sites in the future. Where potential liabilities are alleged, the Company pursues a course of action intended
to mitigate them.
The Company accrues for potential environmental liabilities in a manner consistent with accounting principles generally accepted
in the United States; that is, when it is probable a liability has been incurred and the amount of the liability is reasonably estimable.
Reserves for environmental liabilities totaled $24 million and $25 million at September 30, 2014 and 2013, respectively. The
Company reviews the status of its environmental sites on a quarterly basis and adjusts its reserves accordingly. Such potential
liabilities accrued by the Company do not take into consideration possible recoveries of future insurance proceeds. They do,
however, take into account the likely share other parties will bear at remediation sites. It is difficult to estimate the Company’s
ultimate level of liability at many remediation sites due to the large number of other parties that may be involved, the complexity
of determining the relative liability among those parties, the uncertainty as to the nature and scope of the investigations and
remediation to be conducted, the uncertainty in the application of law and risk assessment, the various choices and costs associated
with diverse technologies that may be used in corrective actions at the sites, and the often quite lengthy periods over which eventual
remediation may occur. Nevertheless, the Company does not currently believe that any claims, penalties or costs in connection
with known environmental matters will have a material adverse effect on the Company’s financial position, results of operations
or cash flows. In addition, the Company has identified asset retirement obligations for environmental matters that are expected to
be addressed at the retirement, disposal, removal or abandonment of existing owned facilities, primarily in the Power Solutions
business. At September 30, 2014 and 2013, the Company recorded conditional asset retirement obligations of $52 million and $56
million, respectively.
In June 2013, the Company self-reported to the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ)
alleged Foreign Corrupt Practices Act (FCPA) violations related to its Building Efficiency marine business in China dating back
to 2007. These allegations were isolated to the Company’s marine business in China which had annual sales ranging from $20
million to $50 million during this period. The Company, under the oversight of its Audit Committee and Board of Directors,
proactively initiated an investigation into this matter with the assistance of external legal counsel and external forensic accountants.
In connection with this investigation, the Company has made and continues to evaluate certain enhancements to its FCPA compliance
program. The Company continues to fully cooperate with the SEC and the DOJ; however, at this time, the Company is unable to
predict the ultimate resolution of this matter with these agencies.
The Company is involved in a number of product liability and various other casualty lawsuits incident to the operation of its
businesses. The Company maintains insurance coverages and records estimated costs for claims and suits of this nature. It is
management’s opinion that none of these will have a material adverse effect on the Company’s financial position, results of
operations or cash flows. Costs related to such matters were not material to the periods presented.
ITEM 4 MINE SAFETY DISCLOSURES
Not applicable.