##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    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. EmployerIncorporation or Organization)
    
    Identification No.)5757 North Green Bay AvenueMilwaukee, 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)
 þ o
 o þ
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Class
    
    Shares Outstanding at June 30, 2010Common Stock: $0.01 7/18 par value per share
    
    673,311,804




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##### 



JOHNSON CONTROLS, INC
 FORM 10-Q
 Report Index
  
 PagePart I. Financial InformationItem 1. Financial Statements (unaudited)Condensed Consolidated Statements of Financial Position at
June 30, 2010, September 30, 2009 and June 30, 2009
    
    
    3Consolidated Statements of Income for the
Three and Nine Month Periods Ended June 30, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the
Three and Nine Month Periods Ended June 30, 2010 and 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Report of Independent Registered Public Accounting Firm
    
    
    38Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    39Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    57Item 4. Controls and Procedures
    
    
    57Part II. Other InformationItem 1. Legal Proceedings
    
    
    58Item 1A. Risk Factors
    
    
    58Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    58Item 6. Exhibits
    
    
    59Signatures
    
    
    60EX-10.YEX-15EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 Johnson Controls, Inc.
 
 Condensed Consolidated Statements of Financial Position
 June 30,
    
    
    September 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2009AssetsCash and cash equivalents
    
    $
    908
    
    
    $
    761
    
    
    $
    543Accounts receivable  net
    
    
    5,452
    
    
    
    5,528
    
    
    
    4,910Inventories
    
    
    1,644
    
    
    
    1,521
    
    
    
    1,561Other current assets
    
    
    2,114
    
    
    
    2,016
    
    
    
    1,725Current assets
    
    
    10,118
    
    
    
    9,826
    
    
    
    8,739Property, plant and equipment  net
    
    
    3,706
    
    
    
    3,986
    
    
    
    3,969Goodwill
    
    
    6,217
    
    
    
    6,542
    
    
    
    6,420Other intangible assets  net
    
    
    695
    
    
    
    746
    
    
    
    745Investments in partially-owned affiliates
    
    
    766
    
    
    
    718
    
    
    
    713Other noncurrent assets
    
    
    2,584
    
    
    
    2,270
    
    
    
    1,880Total assets
    
    $
    24,086
    
    
    $
    24,088
    
    
    $
    22,466Liabilities and EquityShort-term debt
    
    $
    73
    
    
    $
    658
    
    
    $
    605Current portion of long-term debt
    
    
    654
    
    
    
    140
    
    
    
    172Accounts payable
    
    
    4,874
    
    
    
    4,434
    
    
    
    3,741Accrued compensation and benefits
    
    
    1,054
    
    
    
    872
    
    
    
    892Other current liabilities
    
    
    2,377
    
    
    
    2,612
    
    
    
    2,533Current liabilities
    
    
    9,032
    
    
    
    8,716
    
    
    
    7,943Long-term debt
    
    
    2,638
    
    
    
    3,168
    
    
    
    4,001Postretirement health and other benefits
    
    
    206
    
    
    
    255
    
    
    
    217Other noncurrent liabilities
    
    
    2,565
    
    
    
    2,610
    
    
    
    1,876Long-term liabilities
    
    
    5,409
    
    
    
    6,033
    
    
    
    6,094Commitments and contingencies (Note 19)Redeemable noncontrolling interests
    
    
    163
    
    
    
    155
    
    
    
    168Shareholders equity attributable to
Johnson Controls, Inc.
    
    
    9,395
    
    
    
    9,100
    
    
    
    8,178Noncontrolling interests
    
    
    87
    
    
    
    84
    
    
    
    83Total equity
    
    
    9,482
    
    
    
    9,184
    
    
    
    8,261Total liabilities and equity
    
    $
    24,086
    
    
    $
    24,088
    
    
    $
    22,466
  3




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##### Table of Contents



Johnson Controls, Inc.
 
 Consolidated Statements of Income
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net salesProducts and systems*
    
    $
    6,798
    
    
    $
    5,304
    
    
    $
    20,116
    
    
    $
    15,668Services*
    
    
    1,742
    
    
    
    1,675
    
    
    
    5,149
    
    
    
    4,9628,540
    
    
    
    6,979
    
    
    
    25,265
    
    
    
    20,630Cost of salesProducts and systems
    
    
    5,783
    
    
    
    4,608
    
    
    
    17,254
    
    
    
    14,243Services
    
    
    1,418
    
    
    
    1,332
    
    
    
    4,213
    
    
    
    3,9817,201
    
    
    
    5,940
    
    
    
    21,467
    
    
    
    18,224Gross profit
    
    
    1,339
    
    
    
    1,039
    
    
    
    3,798
    
    
    
    2,406Selling, general and administrative expenses
    
    
    (895
    )
    
    
    (787
    )
    
    
    (2,625
    )
    
    
    (2,449
    )Restructuring costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (230
    )Net financing charges
    
    
    (39
    )
    
    
    (65
    )
    
    
    (117
    )
    
    
    (167
    )Equity income (loss)
    
    
    52
    
    
    
    30
    
    
    
    156
    
    
    
    (104
    )Income (loss) before income taxes
    
    
    457
    
    
    
    217
    
    
    
    1,212
    
    
    
    (544
    )Provision for income taxes
    
    
    31
    
    
    
    50
    
    
    
    123
    
    
    
    109Net income (loss)
    
    
    426
    
    
    
    167
    
    
    
    1,089
    
    
    
    (653
    )Income (loss) attributable to noncontrolling interests
    
    
    8
    
    
    
    4
    
    
    
    47
    
    
    
    (15
    )Net income (loss) attributable to Johnson Controls, Inc.
    
    $
    418
    
    
    $
    163
    
    
    $
    1,042
    
    
    $
    (638
    )Earnings (loss) per shareBasic
    
    $
    0.62
    
    
    $
    0.27
    
    
    $
    1.55
    
    
    $
    (1.07
    )Diluted
    
    $
    0.61
    
    
    $
    0.26
    
    
    $
    1.53
    
    
    $
    (1.07
    )
 
 *
    
    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.  4




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##### Table of Contents



Johnson Controls, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Operating ActivitiesNet income (loss) attributable to Johnson Controls, Inc.
    
    $
    418
    
    
    $
    163
    
    
    $
    1,042
    
    
    $
    (638
    )Income (loss) attributable to noncontrolling interests
    
    
    8
    
    
    
    4
    
    
    
    47
    
    
    
    (15
    )Net income (loss)
    
    
    426
    
    
    
    167
    
    
    
    1,089
    
    
    
    (653
    )Adjustments to reconcile net income (loss) to
cash provided by operating activities:Depreciation
    
    
    158
    
    
    
    172
    
    
    
    492
    
    
    
    535Amortization of intangibles
    
    
    10
    
    
    
    8
    
    
    
    32
    
    
    
    26Equity in earnings of partially-owned affiliates,
net of dividends received
    
    
    6
    
    
    
    (4
    )
    
    
    (38
    )
    
    
    207Deferred income taxes
    
    
    (51
    )
    
    
    (20
    )
    
    
    (95
    )
    
    
    202Impairment charges
    
    
    11
    
    
    
    
    
    
    
    30
    
    
    
    156Equity-based compensation
    
    
    8
    
    
    
    19
    
    
    
    37
    
    
    
    47Other
    
    
    9
    
    
    
    28
    
    
    
    42
    
    
    
    42Changes in working capital, excluding acquisitions:Accounts receivable
    
    
    (182
    )
    
    
    (27
    )
    
    
    (218
    )
    
    
    1,297Inventories
    
    
    (111
    )
    
    
    135
    
    
    
    (208
    )
    
    
    476Other current assets
    
    
    (58
    )
    
    
    (6
    )
    
    
    (169
    )
    
    
    (13
    )Restructuring reserves
    
    
    (32
    )
    
    
    (53
    )
    
    
    (156
    )
    
    
    (22
    )Accounts payable and accrued liabilities
    
    
    219
    
    
    
    87
    
    
    
    595
    
    
    
    (1,666
    )Accrued income taxes
    
    
    14
    
    
    
    (12
    )
    
    
    15
    
    
    
    (275
    )Cash provided by operating activities
    
    
    427
    
    
    
    494
    
    
    
    1,448
    
    
    
    359Investing ActivitiesCapital expenditures
    
    
    (215
    )
    
    
    (103
    )
    
    
    (526
    )
    
    
    (529
    )Sale of property, plant and equipment
    
    
    10
    
    
    
    5
    
    
    
    34
    
    
    
    8Acquisition of businesses, net of cash acquired
    
    
    (17
    )
    
    
    
    
    
    
    (32
    )
    
    
    (32
    )Recoverable customer engineering expenditures
    
    
    (18
    )
    
    
    (20
    )
    
    
    (56
    )
    
    
    (68
    )Settlement of cross-currency interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31Changes in long-term investments
    
    
    (45
    )
    
    
    (21
    )
    
    
    (75
    )
    
    
    (84
    )Cash used by investing activities
    
    
    (285
    )
    
    
    (139
    )
    
    
    (655
    )
    
    
    (674
    )Financing ActivitiesIncrease (decrease) in short-term debt  net
    
    
    10
    
    
    
    (23
    )
    
    
    (569
    )
    
    
    164Increase in long-term debt
    
    
    6
    
    
    
    2
    
    
    
    519
    
    
    
    880Repayment of long-term debt
    
    
    (21
    )
    
    
    (9
    )
    
    
    (524
    )
    
    
    (340
    )Payment of cash dividends
    
    
    (87
    )
    
    
    (77
    )
    
    
    (251
    )
    
    
    (231
    )Proceeds from the exercise of stock options
    
    
    12
    
    
    
    2
    
    
    
    44
    
    
    
    3Other
    
    
    76
    
    
    
    (18
    )
    
    
    135
    
    
    
    (2
    )Cash provided (used) by financing activities
    
    
    (4
    )
    
    
    (123
    )
    
    
    (646
    )
    
    
    474Increase in cash and cash equivalents
    
    $
    138
    
    
    $
    232
    
    
    $
    147
    
    
    $
    159
  5




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Johnson Controls, Inc.
 
 Notes to Condensed Consolidated Financial Statements
 June 30, 2010
 (unaudited)
 1.
    
    Financial Statements
 In the opinion of management, the accompanying unaudited condensed 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 condensed or omitted pursuant to the rules and regulations of the
United States Securities and Exchange Commission (SEC). These condensed 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, 2009. The results of operations for the three and nine month periods ended June
30, 2010 are not necessarily indicative of results for the Companys 2010 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.Certain prior year amounts have been revised to conform to the current years presentation.
Redeemable noncontrolling interests are classified as mezzanine equity (temporary equity) in the
condensed consolidated statements of financial position. Refer to Note 14, Equity and
Noncontrolling Interests, to the financial statements for further information.The financial results for the nine month period ended June 30, 2009 include an out of period
adjustment of $62 million made in the first and second quarters of fiscal 2009 to correct an error
related to the power solutions segment. The correction of the error, which reduces segment income,
primarily originated in fiscal 2007 and 2008 and resulted in the overstatement of inventory and
understatement of cost of sales in prior periods. The Company determined that the impact of the
error on the originating periods was immaterial, and accordingly a restatement of prior period
amounts was not considered necessary. The Company also determined the impact of correcting the
error in fiscal 2009 was not material.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 when it has less than a 50% ownership. In order to determine whether to consolidate a
partially-owned affiliate when the Company has less than a 50% ownership, 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 exposed to the majority of the
risks and rewards associated with the VIE is the VIEs primary beneficiary and must consolidate the
entity.
 Based upon the criteria set forth in ASC 810, the Company has determined that for the reporting
periods ended June 30, 2010, September 30, 2009 and June 30, 2009 it was the primary beneficiary in
two VIEs in which it holds less than 50% ownership as the Company funds the entities short-term
liquidity needs. Both entities are consolidated within the automotive experience North America
segment. The Company did not have a significant variable interest in any unconsolidated VIEs for
the presented reporting periods. The carrying amounts and classification of assets and liabilities
included in the Companys consolidated statements of financial position for consolidated VIEs are
as follows (in millions):
 6




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 June 30,
    
    
    September 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2009Current assets
    
    $
    187
    
    
    $
    146
    
    
    $
    116Noncurrent assets
    
    
    72
    
    
    
    101
    
    
    
    106Total assets
    
    $
    259
    
    
    $
    247
    
    
    $
    222Current liabilities
    
    $
    165
    
    
    $
    103
    
    
    $
    76Noncurrent liabilities
    
    
    
    
    
    
    
    
    
    
    Total liabilities
    
    $
    165
    
    
    $
    103
    
    
    $
    76
 2.
    
    New Accounting Standards
 In December 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-17, Consolidations
(Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest
Entities. ASU No. 2009-17 changes how a company determines when an entity that is insufficiently
capitalized or is not controlled through voting should be consolidated. The determination of
whether a company is required to consolidate an entity is based on, among other things, an entitys
purpose and design and a companys ability to direct the activities of the entity that most
significantly impact the entitys economic performance. This statement is effective for the Company
beginning in the first quarter of fiscal 2011 (October 1, 2010). The Company is assessing the
potential impact that the adoption of ASU No. 2009-17 will have on its consolidated financial
condition and results of operations.In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605):
Multiple-Deliverable Revenue Arrangements  a consensus of the FASB Emerging Issues Task Force.
ASU No. 2009-13 establishes the accounting and reporting guidance for arrangements under which a
vendor will perform multiple revenue-generating activities. Specifically, this ASU addresses how to
separate deliverables and how to measure and allocate arrangement consideration to one or more
units of accounting. This guidance will be effective for the Company beginning in the first quarter
of fiscal 2011 (October 1, 2010) and, when adopted, will change the Companys accounting treatment
for multiple-element revenue arrangements on a prospective basis. The adoption of this guidance is
not expected to have a significant impact on the Companys consolidated financial condition and
results of operations.In December 2008, the FASB issued guidance on an employers disclosures about plan assets of a
defined benefit pension plan. The guidance requires enhanced transparency surrounding the types of
plan assets and associated risks, as well as disclosure of information about fair value
measurements of plan assets. This guidance is included in ASC 715, Compensation  Retirement
Benefits, and is effective for the Company for the fiscal year ending September 30, 2010. The
adoption of this guidance will have no impact on the Companys consolidated financial condition and
results of operations.In December 2007, the FASB issued guidance changing the accounting for business combinations in a
number of areas including the treatment of contingent consideration, preacquisition contingencies,
transaction costs, in-process research and development and restructuring costs. In addition, under
this guidance changes in an acquired entitys deferred tax assets and uncertain tax positions after
the measurement period will impact income tax expense. This guidance is included in ASC 805,
Business Combinations, and was adopted by the Company in the first quarter of fiscal 2010
(October 1, 2009). This guidance changes the Companys accounting treatment for business
combinations on a prospective basis.In December 2007, the FASB issued guidance changing the accounting and reporting for minority
interests, which are recharacterized as noncontrolling interests and classified as a component of
equity. This new consolidation method changes the accounting for transactions with minority
interest holders. This guidance is included in ASC 810, Consolidation, and was adopted by the
Company in the first quarter of fiscal 2010 (October 1, 2009). The adoption of this guidance did
not have a material impact on the Companys consolidated financial condition and
 7




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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 results of operations. Refer to Note 14, Equity and Noncontrolling Interests, to the financial
statements for further discussion.In September 2006, the FASB issued guidance that defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements. This guidance also
establishes a fair value hierarchy that prioritizes information used in developing assumptions when
pricing an asset or liability. This guidance is included in ASC 820, Fair Value Measurements and
Disclosures. The Company adopted this guidance effective October 1, 2008. In February 2008, the
FASB delayed the effective date of this guidance for nonfinancial assets and nonfinancial
liabilities that are recognized or disclosed in the financial statements on a nonrecurring basis to
fiscal years beginning after November 15, 2008. The provisions of this guidance for nonfinancial
assets and nonfinancial liabilities were effective for the Company in the first quarter of fiscal
2010 (October 1, 2009) and will be applied prospectively to fair value assessments such as the
Companys long-lived asset impairment analyses. Refer to Note 17, Impairment of Long-Lived
Assets, to the financial statements for further discussion.
 3.
    
    Acquisition of Businesses
 In the first nine months of fiscal 2010, the Company completed three acquisitions for a combined
purchase price of $35 million, of which $32 million was paid as of June 30, 2010. 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 $5 million. The purchase price
allocation may be subsequently adjusted to reflect final valuation studies.In the first nine months of fiscal 2009, the Company completed two acquisitions for a combined
purchase price of $37 million, of which $32 million was paid as of June 30, 2009. Neither of the
acquisitions was material to the Companys consolidated financial statements. In connection with
these acquisitions, the Company recorded goodwill of $24 million.
 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 within accounts receivable  net and billings in excess of costs and
earnings on uncompleted contracts within other current liabilities in the condensed consolidated
statements of financial position. Amounts included within accounts receivable  net related to
these contracts were $614 million, $579 million and $522 million at June 30, 2010, September 30,
2009, and June 30, 2009, respectively. Amounts included within other current liabilities were $610
million, $601 million and $610 million at June 30, 2010, September 30, 2009, and June 30, 2009,
respectively.
 5.
    
    Inventories
 Inventories consisted of the following (in millions):
 June 30,
    
    
    September 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2009Raw materials and supplies
    
    $
    787
    
    
    $
    712
    
    
    $
    711Work-in-process
    
    
    254
    
    
    
    225
    
    
    
    213Finished goods
    
    
    693
    
    
    
    674
    
    
    
    721FIFO inventories
    
    
    1,734
    
    
    
    1,611
    
    
    
    1,645LIFO reserve
    
    
    (90
    )
    
    
    (90
    )
    
    
    (84
    )Inventories
    
    $
    1,644
    
    
    $
    1,521
    
    
    $
    1,561
 8




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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 6.
    
    Goodwill and Other Intangible Assets
 The changes in the carrying amount of goodwill in each of the Companys reporting segments for the
three month period ended September 30, 2009 and the nine month period ended June 30, 2010 were as
follows (in millions):
 CurrencyJune 30,
    
    
    Business
    
    
    Translation and
    
    
    September 30,2009
    
    
    Acquisitions
    
    
    Other
    
    
    2009Building efficiencyNorth America systems
    
    $
    515
    
    
    $
    
    
    
    $
    10
    
    
    $
    525North America service
    
    
    658
    
    
    
    
    
    
    
    10
    
    
    
    668North America unitary products
    
    
    483
    
    
    
    
    
    
    
    7
    
    
    
    490Global workplace solutions
    
    
    173
    
    
    
    
    
    
    
    1
    
    
    
    174Europe
    
    
    419
    
    
    
    
    
    
    
    (11
    )
    
    
    408Rest of world
    
    
    549
    
    
    
    
    
    
    
    38
    
    
    
    587Automotive experienceNorth America
    
    
    1,378
    
    
    
    
    
    
    
    (2
    )
    
    
    1,376Europe
    
    
    1,173
    
    
    
    2
    
    
    
    36
    
    
    
    1,211Asia
    
    
    204
    
    
    
    
    
    
    
    19
    
    
    
    223Power solutions
    
    
    868
    
    
    
    
    
    
    
    12
    
    
    
    880Total
    
    $
    6,420
    
    
    $
    2
    
    
    $
    120
    
    
    $
    6,542
 CurrencySeptember 30,
    
    
    Business
    
    
    Translation and
    
    
    June 30,2009
    
    
    Acquisitions
    
    
    Other
    
    
    2010Building efficiencyNorth America systems
    
    $
    525
    
    
    $
    
    
    
    $
    1
    
    
    $
    526North America service
    
    
    668
    
    
    
    4
    
    
    
    
    
    
    
    672North America unitary products
    
    
    490
    
    
    
    
    
    
    
    
    
    
    
    490Global workplace solutions
    
    
    174
    
    
    
    
    
    
    
    (5
    )
    
    
    169Europe
    
    
    408
    
    
    
    
    
    
    
    (69
    )
    
    
    339Rest of world
    
    
    587
    
    
    
    
    
    
    
    (13
    )
    
    
    574Automotive experienceNorth America
    
    
    1,376
    
    
    
    
    
    
    
    1
    
    
    
    1,377Europe
    
    
    1,211
    
    
    
    1
    
    
    
    (190
    )
    
    
    1,022Asia
    
    
    223
    
    
    
    
    
    
    
    (5
    )
    
    
    218Power solutions
    
    
    880
    
    
    
    
    
    
    
    (50
    )
    
    
    830Total
    
    $
    6,542
    
    
    $
    5
    
    
    $
    (330
    )
    
    $
    6,217
 9




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 
 The Companys other intangible assets, primarily from business acquisitions, are valued based on independent
appraisals
and consisted of (in millions):
 June 30, 2010
    
    September 30, 2009
    
    June 30, 2009Gross
    
    
    
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    
    
    
    
    Carrying
    
    Accumulated
    
    
    
    
    
    Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Net
    
    Amount
    
    Amortization
    
    Net
    
    Amount
    
    Amortization
    
    NetAmortized intangible assetsPatented technology
    
    $
    266
    
    
    $
    (180
    )
    
    $
    86
    
    
    $
    308
    
    
    $
    (190
    )
    
    $
    118
    
    
    $
    303
    
    
    $
    (181
    )
    
    $
    122Customer relationships
    
    
    344
    
    
    
    (64
    )
    
    
    280
    
    
    
    345
    
    
    
    (56
    )
    
    
    289
    
    
    
    343
    
    
    
    (51
    )
    
    
    292Miscellaneous
    
    
    63
    
    
    
    (28
    )
    
    
    35
    
    
    
    67
    
    
    
    (25
    )
    
    
    42
    
    
    
    59
    
    
    
    (25
    )
    
    
    34Total amortized
intangible assets
    
    
    673
    
    
    
    (272
    )
    
    
    401
    
    
    
    720
    
    
    
    (271
    )
    
    
    449
    
    
    
    705
    
    
    
    (257
    )
    
    
    448Unamortized intangible assetsTrademarks
    
    
    294
    
    
    
    
    
    
    
    294
    
    
    
    297
    
    
    
    
    
    
    
    297
    
    
    
    297
    
    
    
    
    
    
    
    297Total intangible assets
    
    $
    967
    
    
    $
    (272
    )
    
    $
    695
    
    
    $
    1,017
    
    
    $
    (271
    )
    
    $
    746
    
    
    $
    1,002
    
    
    $
    (257
    )
    
    $
    745
 Amortization of other intangible assets for the three month periods ended June 30, 2010 and
2009 was $10 million and $8 million, respectively. Amortization of other intangible assets for the
nine month periods ended June 30, 2010 and 2009 was $32 million and $26 million, respectively.
Excluding the impact of any future acquisitions, the Company anticipates amortization for fiscal
2011, 2012, 2013, 2014 and 2015 will be approximately $39 million, $32 million, $27 million, $25
million and $23 million, 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 adequacy of the Companys warranty
provisions are adjusted as necessary. While the Companys warranty costs have historically been
within its calculated estimates, 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.
During the fourth quarter of fiscal 2009, the building efficiency North America unitary products
segment increased its warranty reserve by $29 million as a result of the Companys periodic
warranty review process and analysis of return rates.The Companys product warranty liability is recorded in the condensed consolidated statement 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.
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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 The changes in the carrying amount of the Companys total product warranty liability for the nine
months ended June 30, 2010 and 2009 were as follows (in millions):
 Nine Months EndedJune 30,2010
    
    
    2009Balance at beginning of period
    
    $
    344
    
    
    $
    204Accruals for warranties issued during the period
    
    
    169
    
    
    
    163Accruals from acquisitions
    
    
    2
    
    
    
    Accruals related to pre-existing warranties (including
changes in estimates)
    
    
    (1
    )
    
    
    4Settlements made (in cash or in kind) during the period
    
    
    (184
    )
    
    
    (155
    )Currency translation
    
    
    (9
    )
    
    
    (4
    )Balance at end of period
    
    $
    321
    
    
    $
    212
 8.
    
    Restructuring Costs
 To better align the Companys cost structure with global automotive market conditions, the Company
committed to a restructuring plan (2009 Plan) in the second quarter of fiscal 2009 and recorded a
$230 million restructuring charge. The restructuring charge relates to cost reduction initiatives
in the Companys automotive experience, building efficiency and power solutions businesses and
includes workforce reductions and plant consolidations. The Company expects to substantially
complete the 2009 Plan by the end of 2010. The automotive-related restructuring actions target
excess manufacturing capacity resulting from lower industry production in the European, North
American and Japanese automotive markets. The restructuring actions in building efficiency are
primarily in Europe where the Company is centralizing certain functions and rebalancing its
resources to target the geographic markets with the greatest potential growth. Power solutions
actions are focused on optimizing its manufacturing capacity as a result of lower overall demand
for original equipment batteries resulting from lower vehicle production levels.Since the announcement of the 2009 Plan in March 2009, the Company has experienced lower employee
severance and termination benefit cash payouts than previously calculated for automotive
experience  Europe of approximately $65 million, all of which was identified prior to the current
quarter, due to favorable severance negotiations and the decision to not close previously planned
plants in response to increased customer demand. The underspend of the initial 2009 Plan reserves
will be utilized for additional costs to be incurred as part of power solutions, automotive
experience  Europe and automotive experience  North Americas additional cost reduction
initiatives. The planned workforce reductions disclosed for the 2009 Plan have been updated for
the Companys revised actions.
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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 The following table summarizes the changes in the Companys 2009 Plan reserve, included within
other current liabilities in the condensed consolidated statements of financial position (in
millions):
 EmployeeSeverance andTermination
    
    
    
    
    
    
    CurrencyBenefits
    
    
    Other
    
    
    Translation
    
    
    TotalBalance at September 30, 2009
    
    $
    140
    
    
    $
    2
    
    
    $
    8
    
    
    $
    150Noncash adjustment  underspend
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    (15
    )Noncash adjustment  revised actions
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    15Utilized  cash
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    (22
    )Utilized  noncash
    
    
    
    
    
    
    (2
    )
    
    
    (1
    )
    
    
    (3
    )Balance at December 31, 2009
    
    $
    118
    
    
    $
    
    
    
    $
    7
    
    
    $
    125Noncash adjustment  underspend
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    (22
    )Utilized  cash
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    (20
    )Utilized  noncash
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )Balance at March 31, 2010
    
    $
    76
    
    
    $
    
    
    
    $
    (1
    )
    
    $
    75Utilized  cash
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    (12
    )Utilized  noncash
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Balance at June 30, 2010
    
    $
    64
    
    
    $
    
    
    
    $
    (5
    )
    
    $
    59
 To better align the Companys resources with its growth strategies while reducing the cost
structure of its global operations, the Company committed to a restructuring plan (2008 Plan) in
the fourth quarter of fiscal 2008 and recorded a $495 million restructuring charge. The
restructuring charge relates to cost reduction initiatives in its automotive experience, building
efficiency and power solutions businesses and includes workforce reductions and plant
consolidations. The Company expects to substantially complete the 2008 Plan by the end of 2011.
The automotive-related restructuring is in response to the fundamentals of the European and North
American automotive markets. The actions target reductions in the Companys cost base by
decreasing excess manufacturing capacity due to lower industry production and the continued
movement of vehicle production to low-cost countries, especially in Europe. The restructuring
actions in building efficiency are primarily in Europe where the Company is centralizing certain
functions and rebalancing its resources to target the geographic markets with the greatest
potential growth. Power solutions actions are focused on optimizing its regional manufacturing
capacity.Since the announcement of the 2008 Plan in September 2008, the Company has experienced lower
employee severance and termination benefit cash payouts than previously calculated for building
efficiency  Europe and automotive experience  Europe of approximately $95 million, all of which
was identified prior to the current quarter, due to favorable severance negotiations, individuals
transferred to open positions within the Company and changes in cost reduction actions from plant
consolidation to downsizing of operations. The underspend of the initial 2008 Plan will be
utilized for similar additional restructuring actions committed to be performed during fiscal 2010
and 2011. The underspend experienced by building efficiency  Europe will be utilized for
workforce reductions and plant consolidations in building efficiency  Europe. The underspend
experienced by automotive experience  Europe will be utilized for additional plant consolidations
for automotive experience  North America and workforce reductions in building efficiency 
Europe. The planned workforce reductions disclosed for the 2008 Plan have been updated for the
Companys revised actions.
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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 The following table summarizes the changes in the Companys 2008 Plan reserve, included within
other current liabilities in the condensed consolidated statements of financial position (in
millions):
 EmployeeSeverance andTermination
    
    
    Fixed Asset
    
    
    CurrencyBenefits
    
    
    Impairment
    
    
    Translation
    
    
    TotalBalance at September 30, 2009
    
    $
    215
    
    
    $
    
    
    
    $
    (18
    )
    
    $
    197Utilized  cash
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    (36
    )Utilized  noncash
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Balance at December 31, 2009
    
    $
    179
    
    
    $
    
    
    
    $
    (19
    )
    
    $
    160Noncash adjustment  underspend
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (32
    )Noncash adjustment  revised actions
    
    
    35
    
    
    
    19
    
    
    
    
    
    
    
    54Utilized  cash
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    (27
    )Utilized  noncash
    
    
    
    
    
    
    (19
    )
    
    
    (8
    )
    
    
    (27
    )Balance at March 31, 2010
    
    $
    155
    
    
    $
    
    
    
    $
    (27
    )
    
    $
    128Utilized  cash
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    (20
    )Utilized  noncash
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Balance at June 30, 2010
    
    $
    135
    
    
    $
    
    
    
    $
    (32
    )
    
    $
    103
 The 2008 and 2009 Plans include workforce reductions of approximately 20,700 employees (9,300 for
automotive experience  North America, 5,700 for automotive experience  Europe, 1,100 for
automotive experience  Asia, 400 for building efficiency  North America, 2,700 for building
efficiency  Europe, 700 for building efficiency  rest of world, and 800 for power solutions).
Restructuring charges associated with employee severance and termination benefits are paid over
the severance period granted to each employee and on a lump sum basis when required in accordance
with individual severance agreements. As of June 30, 2010, approximately 16,200 of the employees
have been separated from the Company pursuant to the 2008 and 2009 Plans. In addition, the 2008
and 2009 Plans include 33 plant closures (14 for automotive experience  North America, 11 for
automotive experience  Europe, 3 for automotive experience  Asia, 1 for building efficiency 
North America, 1 for building efficiency  rest of world, and 3 for power solutions). As of June
30, 2010, 22 of the 33 plants have been closed. The restructuring charge for the impairment of
long-lived assets associated with the plant closures was determined using fair value based on a
discounted cash flow analysis.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.
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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 9.
    
    Research and Development
 Expenditures for research activities relating to product development and improvement are charged
against income as incurred and included within selling, general and administrative expenses in the
consolidated statement of income. A portion of the costs associated with these activities is
reimbursed by customers. Such expenditures amounted to $88 million and $29 million for the three
months ended June 30, 2010 and 2009, respectively, and $262 million and $219 million for the nine
months ended June 30, 2010 and 2009, respectively. These expenditures are net of customer
reimbursements of $72 million and $146 million for the three months ended June 30, 2010 and 2009,
respectively, and $239 million and $312 million for the nine months ended June 30, 2010 and 2009,
respectively.
 10.
    
    Income Taxes
 The more significant components of the Companys income tax provision from continuing operations
are as follows (in millions):
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Federal, state and foreign income tax
expense at annual effective rate
    
    $
    82
    
    
    $
    59
    
    
    $
    218
    
    
    $
    (147
    )Effective tax rate adjustment
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    Valuation allowance adjustment
    
    
    (13
    )
    
    
    (3
    )
    
    
    (106
    )
    
    
    252Restructuring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Impairment charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39Uncertain tax positions
    
    
    (38
    )
    
    
    (17
    )
    
    
    (7
    )
    
    
    (17
    )Change in tax status of foreign subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )Interest refund
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )Medicare Part D
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    Provision for income taxes
    
    $
    31
    
    
    $
    50
    
    
    $
    123
    
    
    $
    109
 Effective Tax RateIn 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 nine months ended June 30, 2010, the
Companys estimated annual effective income tax rate from continuing operations was 18%. For the
three and nine months ended June 30, 2009, the Company decreased its estimated annual effective
income tax rate from continuing operations from 31% to 27%, primarily due to a geographical shift
in income and global tax planning initiatives. Because there was a cumulative year-to-date loss,
this created a tax increase of $11 million in the quarter ended June 30, 2009 after applying the
new effective rate to the provision in the prior two quarters.Valuation AllowanceThe Company reviews its deferred tax asset valuation allowances 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.
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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 In the third quarter of fiscal 2010, 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 the deferred tax
assets within a Slovakia automotive entity would be utilized. Therefore, the Company released $13
million of valuation allowances in the three month period ended June 30, 2010.In the first quarter of fiscal 2010, the Company determined that it was more likely than not that a
portion of the deferred tax assets within the Brazil automotive entity would be utilized.
Therefore, the Company released $69 million of valuation allowances. This was comprised of a $93
million decrease in income tax expense offset by a $24 million reduction in cumulative translation
adjustments.In the third quarter of fiscal 2009, 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 within the Brazil power solutions entity would be utilized. Therefore, the
Company released $10 million of valuation allowances in the three month period ended June 30, 2009.
This was comprised of a $3 million decrease in income tax expense with the remaining amount
impacting the condensed consolidated statement of financial position because it related to acquired
net operating losses.In the second quarter of fiscal 2009, 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 the deferred tax
asset associated with a capital loss would be utilized. Therefore, the Company released $45 million
of valuation allowances against the income tax provision in the three month period ended March 31,
2009.In the first quarter of fiscal 2009, as a result of the rapid deterioration in the economic
environment, several jurisdictions incurred unexpected losses in the first quarter that resulted
in cumulative losses over the prior three years. 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 the deferred tax assets would not be utilized in several jurisdictions
including France, Mexico, Spain and the United Kingdom. Therefore, the Company recorded $300
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.It is reasonably possible that over the next 12 months, valuation allowances against deferred tax
assets in certain jurisdictions of up to $100 million may be released.Restructuring ChargeIn the second quarter of fiscal year 2009, the Company recorded a $27 million discrete period tax
adjustment related to the second quarter 2009 restructuring costs using a blended statutory tax
rate of 19.2%. Due to the tax rate change in the third quarter of fiscal 2009, the discrete period
tax adjustment decreased by $9 million for a total tax adjustment for the nine months ended June
30, 2009 of $18 million.Impairment ChargesIn the first quarter of fiscal year 2009, the Company recorded a $30 million discrete period tax
adjustment related to first quarter 2009 impairment costs using a blended statutory tax rate of
12.6%. Due to the effective tax rate change in the second quarter of fiscal 2009, the discrete
period tax adjustment increased by $18 million for a total tax adjustment for the six months ended
March 31, 2009 of $48 million. Due to the tax rate change in the third quarter of fiscal 2009, the
discrete period tax adjustment decreased by $9 million for a total tax adjustment for the nine
months ended June 30, 2009 of $39 million.
 15




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 Uncertain Tax PositionsAt September 30, 2009, the Company had gross tax effected unrecognized tax benefits of $1,049
million of which $874 million, if recognized, would impact the effective tax rate. Total net
accrued interest at September 30, 2009 was approximately $68 million (net of tax benefit). The net
change in interest and penalties during the nine months ended June 30, 2010 was $52 million,
including $26 million of quarterly interest expense on existing uncertain tax positions and $26
million related to the events described below, and was $17 million for the same period in fiscal
2009. The Company recognizes interest and penalties related to unrecognized tax benefits as a
component of income tax expense or goodwill, when applicable.Based on recently published case law in a non-U.S. jurisdiction and the settlement of a tax audit
during the third quarter of fiscal 2010, the Company released net $38 million of reserves for
uncertain tax positions, including interest and penalties.As a result of certain recent events related to prior year tax planning initiatives, during the
first quarter of fiscal 2010, the Company increased the reserve for uncertain tax positions by $31
million, including $26 million of interest and penalties, which impacts the effective tax rate.As a result of various entities exiting business in certain jurisdictions and certain recent
events related to prior tax planning initiatives, during the third quarter of fiscal 2009, the
Company reduced the reserve for uncertain tax positions by $33 million. This was comprised of a
$17 million decrease to tax expense, which impacts the effective tax rate, and a $16 million
decrease to goodwill.
 The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. Judgment is
required in determining its worldwide provision for income taxes and recording the related assets
and liabilities. In the ordinary course of the Companys business, there are many transactions and
calculations where the ultimate tax determination is uncertain. The Company is regularly under
audit by tax authorities, including major jurisdictions noted below:
 Tax
    
    Statute ofJurisdiction
    
    LimitationsAustria
    
    5 yearsBelgium
    
    3 yearsBrazil
    
    5 yearsCanada
    
    5 yearsChina
    
    3 to 5 yearsCzech Republic
    
    3 yearsFrance
    
    3 yearsGermany
    
    4 to 5 yearsItaly
    
    4 yearsJapan
    
    5 to 7 yearsMexico
    
    5 yearsSpain
    
    4 yearsUnited Kingdom
    
    6 yearsUnited States  Federal
    
    3 yearsUnited States  State
    
    3 to 5 years
 16




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 In the U.S., the fiscal years 1999 through 2001 and 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 CoveredAustria
    
    2003  2005Belgium
    
    2005  2008Brazil
    
    2005  2008Canada
    
    2004  2006France
    
    2002  2009Germany
    
    2001  2007Italy
    
    2005  2007Mexico
    
    2003  2004
 It is reasonably possible that certain tax examinations, appellate proceedings and/or tax
litigation will conclude within the next 12 months, the impact of which should not be material to
the financial statements.Change in Tax Status of non-U.S. SubsidiaryFor the nine months ended June 30, 2009, the tax provision decreased as a result of a $30 million
tax benefit realized by a change in tax status of a French subsidiary.The change in tax status resulted from a voluntary tax election that produced a deemed liquidation
for U.S. federal income tax purposes. The Company received a tax benefit in the U.S. for the loss
from the decrease in value from the original tax basis of its investment. This election changed
the tax status from a controlled foreign corporation (i.e., taxable entity) to a branch (i.e.,
flow through entity similar to a partnership) for U.S. federal income tax purposes and is thereby
reported as a discrete period tax benefit in accordance with the provision of ASC 740.Interest RefundThe Company filed a claim for refund in the nine month period ended June 30, 2009, with the
Internal Revenue Service related to interest computations of prior tax payments and refunds. The
refund claim resulted in a tax provision decrease of $6 million.Impacts of Tax LegislationOn March 23, 2010, the U.S. President signed into law comprehensive health care reform legislation
under the Patient Protection and Affordable Care Act (HR3590). Included among the major provisions
of the law is a change in the tax treatment of a portion of Medicare Part D medical payments. The
Company recorded a noncash tax charge of approximately $18 million in the second quarter of fiscal
year 2010 to reflect the impact of this change.During the nine month period ending June 30, 2010, tax legislation was adopted in various
jurisdictions. Other than the item listed above, none of these changes are expected to have a
material impact on the Companys consolidated financial condition, results of operations or cash
flows.
 17




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 11.
    
    Retirement Plans
 The components of the Companys net periodic benefit costs associated with its defined benefit
pension plans and other postretirement health and other benefits are shown in the tables below in
accordance with ASC 715, Compensation  Retirement Benefits (in millions):
 U.S. Pension PlansThree Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    16
    
    
    $
    17
    
    
    $
    50
    
    
    $
    50Interest cost
    
    
    38
    
    
    
    40
    
    
    
    114
    
    
    
    119Expected return on plan assets
    
    
    (44
    )
    
    
    (45
    )
    
    
    (134
    )
    
    
    (134
    )Amortization of net actuarial loss
    
    
    8
    
    
    
    1
    
    
    
    22
    
    
    
    3Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Net periodic benefit cost
    
    $
    18
    
    
    $
    13
    
    
    $
    53
    
    
    $
    39
 Non-U.S. Pension PlansThree Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    9
    
    
    $
    8
    
    
    $
    28
    
    
    $
    23Interest cost
    
    
    16
    
    
    
    16
    
    
    
    51
    
    
    
    48Expected return on plan assets
    
    
    (15
    )
    
    
    (13
    )
    
    
    (47
    )
    
    
    (39
    )Amortization of net actuarial loss
    
    
    3
    
    
    
    1
    
    
    
    8
    
    
    
    3Amortization of prior service cost
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Settlement loss
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Net periodic benefit cost
    
    $
    13
    
    
    $
    13
    
    
    $
    41
    
    
    $
    36
 Postretirement Health and Other BenefitsThree Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    1
    
    
    $
    1
    
    
    $
    3
    
    
    $
    3Interest cost
    
    
    4
    
    
    
    5
    
    
    
    11
    
    
    
    14Amortization of net actuarial gain
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )Amortization of prior service credit
    
    
    (4
    )
    
    
    (2
    )
    
    
    (13
    )
    
    
    (5
    )Net periodic benefit cost
    
    $
    1
    
    
    $
    3
    
    
    $
    1
    
    
    $
    10
 18




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 12.
    
    Debt and Financing Arrangements
 During the quarter ended June 30, 2010, the Company retired approximately $18 million in principal
amount of its fixed rate bonds scheduled to mature on January 15, 2011. The Company used cash to
fund the repurchases.During the quarter ended June 30, 2010, a total of 200 bonds ($200,000 par value) of the Companys
6.5% convertible senior notes scheduled to mature on September 30, 2012, were redeemed for Johnson
Controls, Inc. common stock.During the quarter ended June 30, 2010, a 50 million euro revolving credit facility expired and the
Company entered into a new one year committed, revolving credit facility in the amount of 50
million euro expiring in May 2011. At June 30, 2010, there were no draws on the revolving credit
facility.During the quarter ended March 31, 2010, the Company issued $500 million aggregate principal amount
of 5.0% senior unsecured fixed rate notes due in fiscal 2020. Net proceeds from the issue were used
for general corporate purposes including the retirement of short-term debt.During the quarter ended March 31, 2010, the Company retired approximately $61 million in principal
amount of its fixed rate bonds scheduled to mature on January 15, 2011. The Company used cash to
fund the repurchases.During the quarter ended March 31, 2010, the Company retired its 18 billion yen, three year,
floating rate loan agreement scheduled to mature on January 18, 2011. The Company used cash to
repay the note.During the quarter ended December 31, 2009, the Company retired approximately $13 million in
principal amount of its fixed rate bonds scheduled to mature on January 15, 2011. Additionally, the
Company repurchased 1,685 bonds ($1,685,000 par value) of its 6.5% convertible senior notes
scheduled to mature on September 30, 2012. The Company used cash to fund the repurchases.During the quarter ended December 31, 2009, the Company retired its 12 billion yen, three year,
floating rate loan agreement that matured. Additionally, the Company retired its 7 billion yen,
three year, floating rate loan agreement scheduled to mature on January 18, 2011. The Company used
cash to repay the notes.In May 2009, the Company entered into a new one year revolving credit facility in the amount of 50
million euro expiring in May 2010, which replaced a 100 million euro revolving facility expiring
May 2009.In March 2009, the Company closed concurrent public offerings. The Company issued $402.5 million
aggregate amount of 6.5% senior, unsecured, fixed rate convertible notes that mature September 30,
2012. The notes are convertible into shares of the Companys common stock at a conversion rate of
89.3855 shares of common stock per $1,000 principal amount of notes, which is equal to a conversion
price of approximately $11.19 per share, subject to anti-dilution adjustments. The Company also
issued nine million Equity Units (the Equity Units) each of which has a stated amount of $50 in
an aggregate principal amount of $450 million. The Equity Units consist of (i) a forward purchase
contract obligating the holder to purchase from the Company for a price in cash of $50, on the
purchase contract settlement date of March 31, 2012, subject to early settlement, a certain number
of shares of the Companys common stock and (ii) a 1/20, or 5%, undivided beneficial ownership
interest in $1,000 principal amount of the Companys 11.5% subordinated notes due 2042.In September 2009, the Company settled the results of its previously announced offer to exchange
any and all of its outstanding 6.5% convertible senior notes due 2012 and up to 8,550,000 of its
nine million outstanding Equity Units in the form of Corporate Units. Upon settlement of the
convertible senior notes exchange offer, approximately $400 million aggregate principal amount of
convertible senior notes were exchanged for approximately 36 million shares of common stock and
approximately $61 million in cash ($48 million of debt conversion payments and $13 million of
accrued interest on the convertible senior notes). Upon settlement of the Equity Units exchange
offer approximately 8,082,085 Corporate Units (consisting of $404 million aggregate principal
amount of outstanding
 19




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 11.50% subordinated notes due 2042) were exchanged for approximately 39 million shares of common
stock and approximately $65 million in cash ($52 million of debt conversion payments and $13
million of accrued interest payments on the subordinated notes).In February 2009, the Company entered into a $50 million, three year, floating rate bilateral loan
agreement. The Company drew the entire amount under the loan agreement during the course of the
second quarter of fiscal 2009. Also during the second quarter of fiscal 2009, the Company retired
approximately $54 million in principal amount of its $800 million fixed rate bonds that mature in
January 2011. The Company used proceeds from the $50 million floating rate loan agreement to retire
the bonds.On January 17, 2009, the Company retired its 24 billion yen, three year, floating rate loan
agreement that matured. The Company used proceeds from commercial paper issuances to repay amounts
due under the loan agreement.
 13.
    
    Earnings Per Share
 The Company presents both basic and diluted earnings per share (EPS) amounts. Basic EPS is
calculated by dividing net income by the weighted average number of common shares outstanding
during the reporting period. Diluted EPS is calculated by dividing net income 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. The treasury stock
method assumes that the Company uses the proceeds from the exercise of 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 additional paid-in capital when the award generates a tax deduction. If there would be
a shortfall resulting in a charge to additional paid-in capital, such an amount would be a
reduction of the proceeds.The Companys outstanding Equity Units due 2042 and 6.5% convertible senior notes due 2012 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 and convertible senior notes is added back to the
numerator in calculating diluted earnings per share.
 20




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 The following table reconciles the numerators and denominators used to calculate basic and diluted
earnings per share (in millions):
 Three Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Income Available to Common ShareholdersBasic income (loss) available to common shareholders
    
    $
    418
    
    
    $
    163
    
    
    $
    1,042
    
    
    $
    (638
    )Interest expense, net of tax
    
    
    1
    
    
    
    13
    
    
    
    4
    
    
    
    Diluted income (loss) available to common shareholders
    
    $
    419
    
    
    $
    176
    
    
    $
    1,046
    
    
    $
    (638
    )Weighted Average Shares OutstandingBasic weighted average shares outstanding
    
    
    672.7
    
    
    
    594.7
    
    
    
    671.6
    
    
    
    593.9Effect of dilutive securities:Stock options
    
    
    6.2
    
    
    
    1.8
    
    
    
    6.1
    
    
    
    Equity units
    
    
    4.5
    
    
    
    43.7
    
    
    
    4.5
    
    
    
    Convertible senior notes
    
    
    0.1
    
    
    
    36.0
    
    
    
    0.1
    
    
    
    Diluted weighted average shares outstanding
    
    
    683.5
    
    
    
    676.2
    
    
    
    682.3
    
    
    
    593.9Antidilutive SecuritiesOptions to purchase common shares
    
    
    0.5
    
    
    
    6.2
    
    
    
    0.5
    
    
    
    6.2
 For the nine months ended June 30, 2009, the total weighted average of potential dilutive shares
due to stock options, Equity Units and the convertible senior notes was 34.8 million. However,
these items were not included in the computation of diluted net loss per common share for the nine
months ended June 30, 2009, since to do so would decrease the loss per share.During each of the three months ended June 30, 2010 and 2009, the Company declared a dividend of
$0.13 per common share and during each of the nine months ended June 30, 2010 and 2009, the Company
declared three quarterly dividends totaling $0.39 per common share. The Company paid all dividends
in the month subsequent to the end of each fiscal quarter.
 21




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 14.
    
    Equity and Noncontrolling Interests
 In December 2007, the FASB issued guidance changing the accounting and reporting for minority
interests, which are recharacterized as noncontrolling interests and classified as a component of
equity or as redeemable noncontrolling interests and classified as mezzanine equity (temporary
equity). In addition, the guidance changes the presentation and accounting for noncontrolling
interests, and requires that equity presented in the consolidated financial statements include
amounts attributable to Johnson Controls, Inc. shareholders and the noncontrolling interests. This
guidance is included in ASC 810, Consolidation, and was effective for the Company October 1,
2009.
 The following schedules present changes in consolidated equity attributable to Johnson Controls,
Inc. and noncontrolling interests (in millions):
 Three Months Ended June 30, 2010
    
    
    Three Months Ended June 30, 2009Equity
    
    
    Equity
    
    
    
    
    
    
    Equity
    
    
    EquityAttributable to
    
    
    Attributable to
    
    
    
    
    
    
    Attributable to
    
    
    Attributable toJohnson
    
    
    Noncontrolling
    
    
    
    
    
    
    Johnson
    
    
    NoncontrollingControls, Inc.
    
    
    Interests
    
    
    Total Equity
    
    
    Controls, Inc.
    
    
    Interests
    
    
    Total EquityBeginning balance, March 31
    
    $
    9,378
    
    
    $
    96
    
    
    $
    9,474
    
    
    $
    7,855
    
    
    $
    76
    
    
    $
    7,931Total comprehensive income (loss):Net income (loss)
    
    
    418
    
    
    
    (5
    )
    
    
    413
    
    
    
    163
    
    
    
    10
    
    
    
    173Foreign currency translation adjustments
    
    
    (322
    )
    
    
    (2
    )
    
    
    (324
    )
    
    
    194
    
    
    
    2
    
    
    
    196Realized and unrealized gains (losses)
on derivatives
    
    
    (14
    )
    
    
    
    
    
    
    (14
    )
    
    
    28
    
    
    
    
    
    
    
    28Unrealized losses
on marketable common stock
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Employee retirement plans
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive income (loss)
    
    
    (333
    )
    
    
    (2
    )
    
    
    (335
    )
    
    
    222
    
    
    
    2
    
    
    
    224Comprehensive income (loss)
    
    
    85
    
    
    
    (7
    )
    
    
    78
    
    
    
    385
    
    
    
    12
    
    
    
    397Other changes in equity:Cash dividends -
common stock ($0.13 per share)
    
    
    (88
    )
    
    
    
    
    
    
    (88
    )
    
    
    (77
    )
    
    
    
    
    
    
    (77
    )Dividends attributable to
noncontrolling interests
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )Redemption value adjustment attributable
to redeemable noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Other, including options exercised
    
    
    20
    
    
    
    1
    
    
    
    21
    
    
    
    20
    
    
    
    1
    
    
    
    21Ending balance, June 30
    
    $
    9,395
    
    
    $
    87
    
    
    $
    9,482
    
    
    $
    8,178
    
    
    $
    83
    
    
    $
    8,261
 22




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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 Nine Months Ended June 30, 2010
    
    
    Nine Months Ended June 30, 2009Equity
    
    
    Equity
    
    
    
    
    
    
    Equity
    
    
    EquityAttributable to
    
    
    Attributable to
    
    
    
    
    
    
    Attributable to
    
    
    Attributable toJohnson
    
    
    Noncontrolling
    
    
    
    
    
    
    Johnson
    
    
    NoncontrollingControls, Inc.
    
    
    Interests
    
    
    Total Equity
    
    
    Controls, Inc.
    
    
    Interests
    
    
    Total EquityBeginning balance, September 30
    
    $
    9,100
    
    
    $
    84
    
    
    $
    9,184
    
    
    $
    9,406
    
    
    $
    77
    
    
    $
    9,483Total comprehensive income (loss):Net income (loss)
    
    
    1,042
    
    
    
    25
    
    
    
    1,067
    
    
    
    (638
    )
    
    
    20
    
    
    
    (618
    )Foreign currency translation adjustments
    
    
    (604
    )
    
    
    (3
    )
    
    
    (607
    )
    
    
    (383
    )
    
    
    (1
    )
    
    
    (384
    )Realized and unrealized gains (losses)
on derivatives
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )
    
    
    30
    
    
    
    
    
    
    
    30Unrealized losses
on marketable common stock
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Employee retirement plans
    
    
    43
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    Other comprehensive loss
    
    
    (570
    )
    
    
    (3
    )
    
    
    (573
    )
    
    
    (353
    )
    
    
    (1
    )
    
    
    (354
    )Comprehensive income (loss)
    
    
    472
    
    
    
    22
    
    
    
    494
    
    
    
    (991
    )
    
    
    19
    
    
    
    (972
    )Other changes in equity:Cash dividends -
common stock ($0.13 per share)
    
    
    (262
    )
    
    
    
    
    
    
    (262
    )
    
    
    (231
    )
    
    
    
    
    
    
    (231
    )Dividends attributable to
noncontrolling interests
    
    
    
    
    
    
    (20
    )
    
    
    (20
    )
    
    
    
    
    
    
    (14
    )
    
    
    (14
    )Redemption value adjustment attributable
to  redeemable noncontrolling interests
    
    
    9
    
    
    
    
    
    
    
    9
    
    
    
    (31
    )
    
    
    
    
    
    
    (31
    )Other, including options exercised
    
    
    76
    
    
    
    1
    
    
    
    77
    
    
    
    25
    
    
    
    1
    
    
    
    26Ending balance, June 30
    
    $
    9,395
    
    
    $
    87
    
    
    $
    9,482
    
    
    $
    8,178
    
    
    $
    83
    
    
    $
    8,261
 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
    
    
    Three Months EndedJune 30, 2010
    
    
    June 30, 2009Beginning balance, March 31
    
    $
    153
    
    
    $
    168Net income (loss)
    
    
    13
    
    
    
    (6
    )Foreign currency translation adjustments
    
    
    (3
    )
    
    
    1Redemption value adjustment
    
    
    
    
    
    
    5Ending balance, June 30
    
    $
    163
    
    
    $
    168
 23




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 Nine Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2009Beginning balance, September 30
    
    $
    155
    
    
    $
    177Net income (loss)
    
    
    22
    
    
    
    (35
    )Foreign currency translation adjustments
    
    
    (5
    )
    
    
    (3
    )Dividends attributable to noncontrolling interests
    
    
    
    
    
    
    (2
    )Redemption value adjustment
    
    
    (9
    )
    
    
    31Ending balance, June 30
    
    $
    163
    
    
    $
    168
 15.
    
    Derivative Instruments and Hedging Activities
 In March 2008, the FASB issued guidance enhancing required disclosures regarding derivatives and
hedging activities, including how an entity uses derivative instruments, how derivative instruments
and related hedged items are accounted for and affect an entitys financial position, financial
performance and cash flows. This guidance is included in ASC 815, Derivatives and Hedging, and
was effective for the Company beginning in the second quarter of fiscal 2009 and is applied
prospectively.The Company selectively uses derivative instruments to reduce market risk associated with changes
in foreign currency, commodities, stock-based compensation liabilities and interest rates. Under
Company policy, the use of derivatives is restricted to those intended for hedging purposes; the
use of any derivative instrument for speculative purposes is strictly prohibited. A description of
each type of derivative utilized by the Company to manage risk is included in the following
paragraphs. In addition, refer to Note 16, Fair Value Measurements, to the financial statements
for information related to the fair value measurements and valuation methods utilized by the
Company for each derivative type.The Company has global operations and participates in the foreign exchange markets to minimize its
risk of loss from fluctuations in foreign currency exchange rates. The Company primarily uses
foreign currency exchange contracts to hedge certain of its foreign exchange rate exposures. The
Company hedges 70% to 90% of the nominal amount of each of its known foreign exchange
transactional exposures.The Company has entered into foreign currency denominated debt obligations and cross-currency
interest rate swaps to selectively hedge portions of its net investment in Japan. The currency
effects of the debt obligations and cross-currency interest rate swaps are reflected in the
accumulated other comprehensive income (AOCI) account within shareholders equity attributable to
Johnson Controls, Inc. where they offset gains and losses recorded on the Companys net investment
in Japan. At June 30, 2009 and September 30, 2009, the Company had 37 billion yen of foreign
denominated debt designated as a net investment hedge. During the first quarter of fiscal 2010, the
Company retired 19 billion yen of foreign denominated debt which had previously been designated as
a net investment hedge in the Companys net investment in Japan. During the second quarter of
fiscal 2010, the Company retired the remaining 18 billion yen of foreign denominated debt which has
previously been designated as a net investment hedge in the Companys net investment in Japan. In
its place, the Company entered into three cross-currency interest rate swaps totaling 20 billion
yen.The Company uses commodity contracts in the financial derivatives market in cases where commodity
price risk cannot be naturally offset or hedged through supply base fixed price contracts.
Commodity risks are systematically managed pursuant to policy guidelines. As cash flow hedges, the
effective portion of the hedge gains or losses due to changes in fair value are initially recorded
as a component of AOCI and are subsequently reclassified into earnings when the hedged
transactions, typically sales or costs related to sales, occur and affect earnings. Any ineffective
portion of the hedge is reflected in the consolidated statement of income. The maturities of the
commodity contracts coincide with the expected purchase of the commodities. The Company had the
following outstanding commodity hedge contracts that hedge forecasted purchases:
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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 Volume Outstanding as ofCommodity
    
    Units
    
    June 30, 2010
    
    September 30, 2009
    
    June 30, 2009Copper
    
    Pounds
    
    
    16,735,000
    
    
    
    12,180,000
    
    
    
    10,350,000Lead
    
    Metric Tons
    
    
    25,961
    
    
    
    
    
    
    
    2,250Polypropylene
    
    Pounds
    
    
    
    
    
    
    
    
    
    
    4,000,000
 In addition, the Company selectively uses equity swaps to reduce market risk associated with
certain of its stock-based compensation plans, such as its deferred compensation plans. These
equity compensation liabilities increase as the Companys stock price increases and decrease as
the Companys stock price decreases. In contrast, the value of the swap agreement moves in the
opposite direction of these liabilities, allowing the Company to fix a portion of the liabilities
at a stated amount. As of June 30, 2010, September 30, 2009 and June 30, 2009, the Company had
hedged approximately 3.4 million, 2.8 million and 2.1 million shares of its common stock,
respectively.The Company selectively uses interest rate swaps to reduce market risk associated with changes in
interest rates for its fixed-rate bonds. As fair value hedges, the interest rate swaps and related
debt balances are valued under a market approach using publicized swap curves. Changes in the fair
value of the swap and hedged portion of the debt are recorded in the consolidated statement of
income. In the fourth quarter of fiscal 2009, the Company entered into three fixed to floating
interest rate swaps totaling $700 million to hedge the coupons of its 5.25% bonds maturing on
January 15, 2011. In the second quarter of fiscal 2010, the Company unwound $100 million of one of
the three outstanding interest rate swaps. During the second quarter of fiscal 2010, the Company
entered into a fixed to floating interest rate swap totaling $100 million to hedge the coupon of
its 5.80% bond maturing November 15, 2012 and two fixed to floating swaps totaling $300 million to
hedge the coupon of its 4.875% bond maturing September 15, 2013. At June 30, 2009, the Company did
not have any interest rate swaps outstanding.
 25




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 
 The following table presents the location and fair values of derivative instruments and hedging
activities included in the Companys condensed consolidated statements of financial position (in
millions):
 Derivatives and Hedging Activities Designated as
    
    
    Derivatives and Hedging Activities Not DesignatedHedging Instruments under ASC 815
    
    
    as Hedging Instruments under ASC 815June 30,
    
    
    September 30,
    
    
    June 30,
    
    
    June 30,
    
    
    September 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2009Other current assetsForeign currency exchange derivatives
    
    $
    14
    
    
    $
    40
    
    
    $
    19
    
    
    $
    9
    
    
    $
    36
    
    
    $
    14Commodity derivatives
    
    
    2
    
    
    
    7
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Other noncurrent assetsInterest rate swaps
    
    
    9
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    70
    
    
    
    45Foreign currency exchange derivatives
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    1Total assets
    
    $
    26
    
    
    $
    53
    
    
    $
    23
    
    
    $
    101
    
    
    $
    107
    
    
    $
    60Current portion of long-term debtNet investment hedges
    
    $
    
    
    
    $
    134
    
    
    $
    126
    
    
    $
    
    
    
    $
    
    
    
    $
    Fixed rate debt swapped to floating
    
    
    594
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other current liabilitiesForeign currency exchange derivatives
    
    
    15
    
    
    
    44
    
    
    
    24
    
    
    
    8
    
    
    
    27
    
    
    
    Commodity derivatives
    
    
    8
    
    
    
    1
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    Net investment hedges
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long-term debtFixed rate debt swapped to floating
    
    
    404
    
    
    
    704
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net investment hedges
    
    
    
    
    
    
    278
    
    
    
    262
    
    
    
    
    
    
    
    
    
    
    
    Other noncurrent liabilitiesForeign currency exchange derivatives
    
    
    2
    
    
    
    1
    
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    2Total liabilities
    
    $
    1,030
    
    
    $
    1,162
    
    
    $
    425
    
    
    $
    9
    
    
    $
    28
    
    
    $
    2
 26




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 The following table presents the location and amount of gains and losses on derivative
instruments and related hedge items included in the Companys consolidated statements of income for
the three and nine months ended June 30, 2010 and the three and six months ended June 30, 2009 and
gains and losses initially recognized in other comprehensive income (OCI) net of tax or cumulative
translation adjustment (CTA) net of tax in the condensed consolidated statements of financial
position (in millions):
 As of
    
    
    Three Months Ended
    
    
    Three Months EndedJune 30, 2010
    
    
    June 30, 2010
    
    
    June 30, 2010Location of Gain
    
    Amount of GainAmount of Gain
    
    
    (Loss) Reclassified
    
    (Loss) Reclassified
    
    
    Location of Gain
    
    Amount of Gain(Loss) Recognized in
    
    
    from AOCI into
    
    from AOCI into
    
    
    (Loss) Recognized in
    
    (Loss) Recognized inDerivatives in ASC 815 Cash Flow
    
    OCI on Derivative
    
    
    Income (Effective
    
    Income (Effective
    
    
    Income on Derivative
    
    Income on DerivativeHedging Relationships
    
    (Effective Portion)
    
    
    Portion)
    
    Portion)
    
    
    (Ineffective Portion)
    
    (Ineffective Portion)Foreign currency exchange derivatives
    
    $
    (1
    )
    
    Cost of sales
    
    $
    1
    
    
    Cost of sales
    
    $
    Commodity derivatives
    
    
    (5
    )
    
    Cost of sales
    
    
    (1
    )
    
    Cost of sales
    
    
    Total
    
    $
    (6
    )
    
    
    
    $
    
    
    
    
    
    $
    
 Nine Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2010Location of Gain
    
    Amount of Gain(Loss) Reclassified
    
    (Loss) Reclassified
    
    
    Location of Gain
    
    Amount of Gainfrom AOCI into
    
    from AOCI into
    
    
    (Loss) Recognized in
    
    (Loss) Recognized inDerivatives in ASC 815 Cash Flow
    
    Income (Effective
    
    Income (Effective
    
    
    Income on Derivative
    
    Income on DerivativeHedging Relationships
    
    Portion)
    
    Portion)
    
    
    (Ineffective Portion)
    
    (Ineffective Portion)Foreign currency exchange derivatives
    
    Cost of sales
    
    $
    (3
    )
    
    Cost of sales
    
    $
    Commodity derivatives
    
    Cost of sales
    
    
    1
    
    
    Cost of sales
    
    
    Total
    
    
    
    $
    (2
    )
    
    
    
    $
    
 As of
    
    
    Three Months Ended
    
    
    Three Months EndedJune 30, 2009
    
    
    June 30, 2009
    
    
    June 30, 2009Location of Gain
    
    Amount of GainAmount of Gain
    
    
    (Loss) Reclassified
    
    (Loss) Reclassified
    
    
    Location of Gain
    
    Amount of Gain(Loss) Recognized in
    
    
    from AOCI into
    
    from AOCI into
    
    
    (Loss) Recognized in
    
    (Loss) Recognized inDerivatives in ASC 815 Cash Flow
    
    OCI on Derivative
    
    
    Income (Effective
    
    Income (Effective
    
    
    Income on Derivative
    
    Income on DerivativeHedging Relationships
    
    (Effective Portion)
    
    
    Portion)
    
    Portion)
    
    
    (Ineffective Portion)
    
    (Ineffective Portion)Foreign currency exchange derivatives
    
    $
    (3
    )
    
    Net sales
    
    $
    (6
    )
    
    Net sales
    
    $
    Commodity derivatives
    
    
    (9
    )
    
    Cost of sales
    
    
    (24
    )
    
    Cost of sales
    
    
    (1
    )Total
    
    $
    (12
    )
    
    
    
    $
    (30
    )
    
    
    
    $
    (1
    )
 Six Months Ended
    
    
    Six Months EndedJune 30, 2009
    
    
    June 30, 2009Location of Gain
    
    Amount of Gain(Loss) Reclassified
    
    (Loss) Reclassified
    
    
    Location of Gain
    
    Amount of Gainfrom AOCI into
    
    from AOCI into
    
    
    (Loss) Recognized in
    
    (Loss) Recognized inDerivatives in ASC 815 Cash Flow
    
    Income (Effective
    
    Income (Effective
    
    
    Income on Derivative
    
    Income on DerivativeHedging Relationships
    
    Portion)
    
    Portion)
    
    
    (Ineffective Portion)
    
    (Ineffective Portion)Foreign currency exchange derivatives
    
    Net sales
    
    $
    (13
    )
    
    Net sales
    
    $
    Commodity derivatives
    
    Cost of sales
    
    
    (70
    )
    
    Cost of sales
    
    
    (5
    )Total
    
    
    
    $
    (83
    )
    
    
    
    $
    (5
    )
 As of
    
    
    As ofJune 30, 2010
    
    
    June 30, 2009Amount of Gain
    
    
    Amount of Gain(Loss) Recognized in
    
    
    (Loss) Recognized inCTA on Outstanding
    
    
    CTA on OutstandingHedging Activities in ASC 815 Net
    
    Derivatives (Effective
    
    
    Derivatives (EffectiveInvestment Hedging Relationships
    
    Portion)
    
    
    Portion)Net investment hedges
    
    $
    (4
    )
    
    $
    (13
    )Total
    
    $
    (4
    )
    
    $
    (13
    )
 For the three and nine months ended June 30, 2010 and the three and six months ended June 30,
2009, no gains or losses were reclassified from CTA into income for the Companys outstanding net
investment hedges.
 27




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 Three Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2010Amount of Gain (Loss)
    
    
    Amount of Gain (Loss)Derivatives in ASC 815 Fair Value Hedging
    
    Location of Gain (Loss) Recognized in Income on
    
    Recognized in Income on
    
    
    Recognized in Income onRelationships
    
    Derivative
    
    Derivative
    
    
    DerivativeInterest rate swap
    
    Net financing charges
    
    $
    4
    
    
    $
    4Fixed rate debt swapped to floating
    
    Net financing charges
    
    
    (1
    )
    
    
    5Total
    
    
    
    $
    3
    
    
    $
    9
 Three Months Ended
    
    
    Six Months EndedJune 30, 2009
    
    
    June 30, 2009Amount of Gain (Loss)
    
    
    Amount of Gain (Loss)Derivatives in ASC 815 Fair Value Hedging
    
    Location of Gain (Loss) Recognized in Income on
    
    Recognized in Income on
    
    
    Recognized in Income onRelationships
    
    Derivative
    
    Derivative
    
    
    DerivativeInterest rate swap
    
    Net financing charges
    
    $
    
    
    
    $
    Fixed rate debt swapped to floating
    
    Net financing charges
    
    
    
    
    
    
    Total
    
    
    
    $
    
    
    
    $
    
 Three Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2010Amount of Gain (Loss)
    
    
    Amount of Gain (Loss)Derivatives Not Designated as Hedging
    
    Location of Gain (Loss) Recognized in Income on
    
    Recognized in Income on
    
    
    Recognized in Income onInstruments under ASC 815
    
    Derivative
    
    Derivative
    
    
    DerivativeForeign currency exchange derivatives
    
    Cost of sales
    
    $
    110
    
    
    $
    198Foreign currency exchange derivatives
    
    Net financing charges
    
    
    (103
    )
    
    
    (160
    )Equity swap
    
    Selling, general and administrative expenses
    
    
    (21
    )
    
    
    2Commodity derivatives
    
    Cost of sales
    
    
    1
    
    
    
    1Total
    
    
    
    $
    (13
    )
    
    $
    41
 Three Months Ended
    
    
    Six Months EndedJune 30, 2009
    
    
    June 30, 2009Amount of Gain (Loss)
    
    
    Amount of Gain (Loss)Derivatives Not Designated as Hedging
    
    Location of Gain (Loss) Recognized in Income on
    
    Recognized in Income on
    
    
    Recognized in Income onInstruments under ASC 815
    
    Derivative
    
    Derivative
    
    
    DerivativeForeign currency exchange derivatives
    
    Cost of sales
    
    $
    (10
    )
    
    $
    (86
    )Foreign currency exchange derivatives
    
    Net financing charges
    
    
    23
    
    
    
    102Equity swap
    
    Selling, general and administrative expenses
    
    
    16
    
    
    
    20Commodity derivatives
    
    Cost of sales
    
    
    (1
    )
    
    
    (4
    )Total
    
    
    
    $
    28
    
    
    $
    32
 16.
    
    Fair Value Measurements
 ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy
that prioritizes information used in developing assumptions when pricing an asset or liability as
follows:
 Level 1:Observable inputs such as quoted prices in active markets;
 Level 2:Inputs, other than quoted prices in active markets, that are observable either
directly or indirectly; and
 Level 3:Unobservable inputs where there is little or no market data, which requires the
reporting entity to develop its own assumptions.
 28




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 
 ASC 820 requires the use of observable market data, when available, in making fair value
measurements. When inputs used to measure fair value fall within different levels of the hierarchy,
the level within which the fair value measurement is categorized is based on the lowest level input
that is significant to the fair value measurement.
 Recurring Fair Value MeasurementsThe following tables present the Companys fair value hierarchy for those assets and liabilities
measured at fair value as of June 30, 2010, September 30, 2009 and June 30, 2009 (in millions):
 Fair Value Measurements Using:SignificantQuoted Prices
    
    
    Otherin Active
    
    
    Observable
    
    
    SignificantTotal as of
    
    
    Markets
    
    
    Inputs
    
    
    Unobservable InputsJune 30, 2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Other current assetsForeign currency exchange derivatives
    
    $
    23
    
    
    $
    23
    
    
    $
    
    
    
    $
    Commodity derivatives
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    Other noncurrent assetsInterest rate swaps
    
    
    9
    
    
    
    
    
    
    
    9
    
    
    
    Investments in marketable common stock
    
    
    24
    
    
    
    24
    
    
    
    
    
    
    
    Equity swap
    
    
    91
    
    
    
    91
    
    
    
    
    
    
    
    Foreign currency exchange derivatives
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    Total
    
    $
    151
    
    
    $
    140
    
    
    $
    11
    
    
    $
    Current portion of long-term debtFixed rate debt swapped to floating
    
    $
    594
    
    
    $
    
    
    
    $
    594
    
    
    $
    Other current liabilitiesForeign currency exchange derivatives
    
    
    23
    
    
    
    23
    
    
    
    
    
    
    
    Cross-currency interest rate swaps
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    Commodity derivatives
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    Long-term debtFixed rate debt swapped to floating
    
    
    404
    
    
    
    
    
    
    
    404
    
    
    
    Other noncurrent liabilitiesForeign currency exchange derivatives
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    Total
    
    $
    1,039
    
    
    $
    26
    
    
    $
    1,013
    
    
    $
    
 29




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 Fair Value Measurements Using:SignificantQuoted Prices
    
    
    Other
    
    
    Significantin Active
    
    
    Observable
    
    
    UnobservableTotal as of
    
    
    Markets
    
    
    Inputs
    
    
    InputsSeptember 30, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Other current assetsForeign currency exchange derivatives
    
    $
    76
    
    
    $
    76
    
    
    $
    
    
    
    $
    Commodity derivatives
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    Other noncurrent assetsInterest rate swaps
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    Equity swap
    
    
    70
    
    
    
    70
    
    
    
    
    
    
    
    Foreign currency exchange derivatives
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    Total
    
    $
    160
    
    
    $
    148
    
    
    $
    12
    
    
    $
    Current portion long-term debtForeign currency denominated debt
    
    $
    134
    
    
    $
    134
    
    
    $
    
    
    
    $
    Other current liabilitiesForeign currency exchange derivatives
    
    
    71
    
    
    
    71
    
    
    
    
    
    
    
    Commodity derivatives
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Long-term debtFixed rate debt swapped to floating
    
    
    704
    
    
    
    
    
    
    
    704
    
    
    
    Foreign currency denominated debt
    
    
    278
    
    
    
    278
    
    
    
    
    
    
    
    Other noncurrent liabilitiesForeign currency exchange derivatives
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    Total
    
    $
    1,190
    
    
    $
    485
    
    
    $
    705
    
    
    $
    
 30




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 Fair Value Measurements Using:SignificantQuoted Prices
    
    
    Other
    
    
    Significantin Active
    
    
    Observable
    
    
    UnobservableTotal as of
    
    
    Markets
    
    
    Inputs
    
    
    InputsJune 30, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Other current assetsForeign currency exchange derivatives
    
    $
    33
    
    
    $
    33
    
    
    $
    
    
    
    $
    Commodity derivatives
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    Other noncurrent assetsEquity swap
    
    
    45
    
    
    
    45
    
    
    
    
    
    
    
    Foreign currency exchange derivatives
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    Total
    
    $
    83
    
    
    $
    81
    
    
    $
    2
    
    
    $
    Current portion long-term debtForeign currency denominated debt
    
    $
    126
    
    
    $
    126
    
    
    $
    
    
    
    $
    Other current liabilitiesForeign currency exchange derivatives
    
    
    24
    
    
    
    24
    
    
    
    
    
    
    
    Commodity derivatives
    
    
    11
    
    
    
    
    
    
    
    11
    
    
    
    Long-term debtForeign currency denominated debt
    
    
    262
    
    
    
    262
    
    
    
    
    
    
    
    Other noncurrent liabilitiesForeign currency exchange derivatives
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    Total
    
    $
    427
    
    
    $
    416
    
    
    $
    11
    
    
    $
    
 Valuation MethodsForeign currency exchange derivatives  The Company selectively hedges anticipated transactions
that are subject to foreign exchange rate risk primarily using foreign currency exchange hedge
contracts. The foreign currency exchange derivatives are valued under a market approach using
publicized spot and forward prices. As cash flow hedges, the effective portion of the hedge gains
or losses due to changes in fair value are initially recorded as a component of accumulated other
comprehensive income and are subsequently reclassified into earnings when the hedged transactions
occur and affect earnings. Any ineffective portion of the hedge is reflected in the consolidated
statement of income. These contracts are highly effective in hedging the variability in future cash
flows attributable to changes in currency exchange rates at June 30, 2010, September 30, 2009 and
June 30, 2009.Commodity derivatives  The Company selectively hedges anticipated transactions that are subject to
commodity price risk, primarily using commodity hedge contracts, to minimize overall price risk
associated with the Companys purchases of lead, copper and polypropylene. The commodity
derivatives are valued under a market approach using publicized prices, where available, or dealer
quotes. As cash flow hedges, the effective portion of the hedge gains or losses due to changes in
fair value are initially recorded as a component of accumulated other comprehensive income and are
subsequently reclassified into earnings when the hedged transactions, typically sales or cost
related to sales, occur and affect earnings. Any ineffective portion of the hedge is reflected in
the consolidated statement of income. These contracts are highly effective in hedging the
variability in future cash flows attributable to changes in commodity price changes at June 30,
2010, September 30, 2009 and June 30, 2009.Interest rate swaps and related debt  The Company selectively uses interest rate swaps to reduce
market risk associated with changes in interest rates for its fixed-rate bonds. As fair value
hedges, the interest rate swaps and related debt balances are valued under a market approach using
publicized swap curves. Changes in the fair value of the swap and hedged portion of the debt are
recorded in the consolidated statement of income. In the fourth quarter
 31




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##### Table of Contents



Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 of fiscal 2009, the Company entered into three fixed to floating interest rate swaps totaling $700
million to hedge the coupons of its 5.25% bonds maturing on January 15, 2011. In the second quarter
of fiscal 2010, the Company unwound a $100 million portion of one of the three interest swaps
mentioned above. During the second quarter of fiscal 2010, the Company entered into a fixed to
floating interest rate swap totaling $100 million to hedge the coupons of its 5.80% bond maturing
November 15, 2012 and two fixed to floating swaps totaling $300 million to hedge the coupons of its
4.875% bond maturing September 15, 2013. At June 30, 2009, the Company did not have any interest
rate swaps outstanding.Investments in marketable common stock  The Company has invested in certain marketable common
stock during the third quarter of fiscal 2010. The securities are valued under a market approach
using publicized share prices. As of June 30, 2010, the Company recorded an unrealized loss of $2
million in accumulated other comprehensive income and no unrealized gains on these investments.Equity swap  The Company selectively uses equity swaps to reduce market risk associated with
certain of its stock-based compensation plans, such as its deferred compensation plans. The equity
swaps are valued under a market approach as the fair value of the swaps is equal to the Companys
stock price at the reporting period date. Changes in fair value on the equity swaps are reflected
in the consolidated statement of income within selling, general and administrative expenses.Cross-currency interest rate swap  The Company selectively uses cross-currency interest rate swaps
to hedge the foreign currency rate risk associated with certain of its investments in Japan. The
cross-currency interest rate swaps are valued using market assumptions. Changes in the market value
of the swaps are reflected in the foreign currency translation adjustments component of accumulated
other comprehensive income where they offset gains and losses recorded on the Companys net
investment in Japan. The Company entered into three cross-currency swaps totaling 20 billion yen
during the second quarter of fiscal 2010. These swaps are designated as hedges in the Companys net
investment in Japan. There were no cross-currency interest rate swaps outstanding at September 30,
2009 and June 30, 2009.Foreign currency denominated debt  The Company has entered into certain foreign currency
denominated debt obligations to selectively hedge portions of its net investment in Japan. The
currency effects of the debt obligations are reflected in the foreign currency translation
adjustments component of accumulated other comprehensive income where they offset gains and losses
recorded on the Companys net investment in Japan. At June 30, 2009 and September 30, 2009, the
Company had 37 billion yen of foreign denominated debt designated as a net investment hedge. During
the first quarter of fiscal 2010, the Company retired 19 billion yen of foreign denominated debt
which had previously been designated as a net investment hedge in the Companys net investment in
Japan. During the second quarter of fiscal 2010, the Company retired the remaining 18 billion yen
of foreign denominated debt which had previously been designated as a net investment hedge in the
Companys net investment in Japan. There was no foreign currency denominated debt designated as a
net investment hedge outstanding at June 30, 2010.The fair values of cash and cash equivalents, accounts receivable, short-term debt and accounts
payable approximate their carrying values. The fair value of long-term debt, which was $3.6
billion, $3.4 billion and $4.4 billion at June 30, 2010, September 30, 2009 and June 30, 2009,
respectively, was determined using market quotes.
 17.
    
    Impairment of Long-Lived Assets
 The Company reviews long-lived assets for impairment whenever events or changes in circumstances
indicate that the assets carrying amount may not be recoverable. The Company conducts its
long-lived asset impairment analyses in accordance with ASC 360-10-15, Impairment or Disposal of
Long-Lived Assets. ASC 360-10-15 requires the Company to group assets and liabilities at the
lowest level for which identifiable cash flows are largely independent of the cash flows of other
assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash
flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is
recoverable, an impairment charge is measured as the amount by which the carrying amount of the
asset group exceeds its fair value based on discounted cash flow analysis or appraisals.
 32




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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 In the third quarter of fiscal 2010, the Company concluded it had a triggering event requiring
assessment of impairment of its long-lived assets due to the planned relocation of its headquarters
building in Japan in the automotive experience Asia segment. As a result, the Company reviewed its
long-lived assets for impairment and recorded an $11 million impairment charge within selling,
general and administrative expenses in the third quarter of fiscal 2010 related to the Asia
automotive experience segment. The impairment was measured under a market approach utilizing an
appraisal. The inputs utilized in the analysis are classified as Level 3 inputs within the fair
value hierarchy as defined in ASC 820, Fair Value Measurements and Disclosures.At June 30, 2010, the Company concluded it did not have any other triggering events requiring
assessment of impairment of its long-lived assets.In the second quarter of fiscal 2010, the Company concluded it had a triggering event requiring
assessment of impairment of its long-lived assets due to planned plant closures for the North
America automotive experience segment. These closures are a result of the Companys revised
restructuring actions to the 2008 Plan. Refer to Note 8, Restructuring Costs, to the financial
statements for further information regarding the 2008 Plan. As a result, the Company reviewed its
long-lived assets for impairment and recorded a $19 million impairment charge in the second quarter
of fiscal 2010 related to the North America automotive experience segment. This impairment charge
was offset by a decrease in the Companys restructuring reserve related to the 2008 Plan due to
lower employee severance and termination benefit cash payments than previously expected, as
discussed further in Note 8. The impairment was measured under an income approach utilizing
forecasted discounted cash flows for fiscal 2010 through 2014 to fair value the impaired assets.
This method is consistent with the method the Company has employed in prior periods to value other
long-lived assets. The inputs utilized in the discounted cash flow analysis are classified as Level
3 inputs within the fair value hierarchy as defined in ASC 820, Fair Value Measurements and
Disclosures.In the third quarter of fiscal 2009, the Company concluded it had a triggering event requiring
assessment of impairment of its long-lived assets in light of the restructuring plans in North
America announced by Chrysler LLC (Chrysler) and General Motors Corporation (GM) during the quarter
as part of their bankruptcy reorganization plans. As a result, the Company reviewed its long-lived
assets relating to the Chrysler and GM platforms within the North America automotive experience
segment and determined no impairment existed.In the second quarter of fiscal 2009, the Company concluded it had a triggering event requiring
assessment of impairment of its long-lived assets in conjunction with its restructuring plan
announced in March 2009. As a result, the Company reviewed its long-lived assets associated with
the plant closures for impairment and recorded a $46 million impairment charge in the second
quarter of fiscal 2009, of which $25 million related to the North America automotive experience
segment, $16 million related to the Asia automotive experience segment and $5 million related to
the Europe automotive experience segment. Refer to Note 8, Restructuring Costs, to the financial
statements for further information regarding the 2009 restructuring plan. Additionally, at March
31, 2009, in conjunction with the preparation of its financial statements, the Company concluded it
had a triggering event requiring assessment of its other long-lived assets within the Europe
automotive experience segment due to significant declines in European automotive sales volume. As a
result, the Company reviewed its other long-lived assets within the Europe automotive experience
segment for impairment and determined no additional impairment existed.At December 31, 2008, in conjunction with the preparation of its financial statements, the Company
concluded it had a triggering event requiring assessment of impairment of its long-lived assets due
to the significant declines in North American and European automotive sales volumes. As a result,
the Company reviewed its long-lived assets for impairment and recorded a $110 million impairment
charge within cost of sales in the first quarter of fiscal 2009, of which $77 million related to
the North America automotive experience segment and $33 million related to the Europe automotive
experience segment.
 33




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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 The Company reviews its equity investments for impairment whenever there is a loss in value of an
investment which is other than a temporary decline. The Company conducts its equity investment
impairment analyses in accordance with ASC 323, Investments-Equity Method and Joint Ventures. ASC
323 requires the Company to record an impairment charge for a decrease in value of an investment
when the decline in the investment is considered to be other than temporary.At December 31, 2008, in conjunction with the preparation of its financial statements, the Company
concluded it had a triggering event requiring assessment of impairment of its equity investment in
a 48%-owned joint venture with U.S. Airconditioning Distributors, Inc. (U.S. Air) due to the
significant decline in North American residential housing construction starts, which had
significantly impacted the financial results of the equity investment. The Company reviewed its
equity investment in U.S. Air for impairment and as a result, recorded a $152 million impairment
charge within equity income (loss) for the building efficiency North America unitary products
segment in the first quarter of fiscal 2009. The U.S. Air investment balance included in the
condensed consolidated statement of financial position at June 30, 2010 was $53 million. The
Company does not anticipate future impairment of this investment as, based on its current
forecasts, a further decline in value that is other than temporary is not considered reasonably
likely to occur.
 18.
    
    Segment Information
 ASC 280, Segment Reporting, establishes the standards for reporting information about segments in
financial statements. In applying the criteria set forth in ASC 280, the Company has determined
that it has ten reportable segments for financial reporting purposes. Certain segments are
aggregated or combined based on materiality within building efficiency rest of world and power
solutions in accordance with the guidance. The Companys ten reportable segments are presented in
the context of its three primary businesses  building efficiency, automotive experience and power
solutions.Building efficiencyBuilding efficiency designs, produces, markets and installs HVAC and control systems that monitor,
automate and integrate critical building segment equipment and conditions including HVAC,
fire-safety and security in commercial buildings and in various industrial applications.
 
    
    North America systems designs, produces, markets and installs mechanical equipment that
provides heating and cooling in North American non-residential buildings and industrial
applications as well as control systems that integrate the operation of this equipment with
other critical building systems.
 
    
    North America service provides technical services including inspection, scheduled
maintenance, repair and replacement of mechanical and control systems in North America, as
well as the retrofit and service components of performance contracts and other solutions.
 
    
    North America unitary products designs and produces heating and air conditioning
solutions for residential and light commercial applications and markets products to the
replacement and new construction markets.
 
    
    Global workplace solutions provides on-site staff for complete real estate services,
facility operation and management to improve the comfort, productivity, energy efficiency
and cost effectiveness of building systems around the globe.
 
    
    Europe provides HVAC and refrigeration systems and technical services to the European
marketplace.
 
    
    Rest of world provides HVAC and refrigeration systems and technical services to markets
in Asia, the Middle East and Latin America.
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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 
 Automotive experienceAutomotive experience designs and manufactures interior systems and products for passenger cars
and light trucks, including vans, pick-up trucks and sport utility/crossover vehicles in North
America, Europe and Asia. Automotive experience systems and products include complete seating
systems and components; cockpit systems, including instrument panels and clusters, information
displays and body controllers; overhead systems, including headliners and electronic convenience
features; floor consoles; and door systems.Power solutionsPower solutions services both automotive original equipment manufacturers and the battery
aftermarket by providing advanced battery technology, coupled with systems engineering, marketing
and service expertise.
 Management evaluates the performance of the segments based primarily on segment income, which
represents income from continuing operations before income taxes and noncontrolling interests
excluding net financing charges and restructuring costs. General Corporate and other overhead
expenses are allocated to business segments in determining segment income. Financial information
relating to the Companys reportable segments is as follows (in millions):
 Net SalesThree Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Building efficiencyNorth America systems
    
    $
    551
    
    
    $
    563
    
    
    $
    1,552
    
    
    $
    1,671North America service
    
    
    531
    
    
    
    552
    
    
    
    1,505
    
    
    
    1,610North America unitary products
    
    
    243
    
    
    
    227
    
    
    
    574
    
    
    
    477Global workplace solutions
    
    
    787
    
    
    
    708
    
    
    
    2,404
    
    
    
    2,095Europe
    
    
    457
    
    
    
    517
    
    
    
    1,409
    
    
    
    1,587Rest of world
    
    
    648
    
    
    
    600
    
    
    
    1,764
    
    
    
    1,7793,217
    
    
    
    3,167
    
    
    
    9,208
    
    
    
    9,219Automotive experienceNorth America
    
    
    1,740
    
    
    
    988
    
    
    
    4,981
    
    
    
    3,279Europe
    
    
    2,033
    
    
    
    1,706
    
    
    
    6,238
    
    
    
    4,478Asia
    
    
    440
    
    
    
    262
    
    
    
    1,263
    
    
    
    7754,213
    
    
    
    2,956
    
    
    
    12,482
    
    
    
    8,532Power solutions
    
    
    1,110
    
    
    
    856
    
    
    
    3,575
    
    
    
    2,879Total net sales
    
    $
    8,540
    
    
    $
    6,979
    
    
    $
    25,265
    
    
    $
    20,630
 35




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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 Segment IncomeThree Months Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Building efficiencyNorth America systems
    
    $
    74
    
    
    $
    63
    
    
    $
    180
    
    
    $
    173North America service
    
    
    20
    
    
    
    58
    
    
    
    42
    
    
    
    129North America unitary products
    
    
    16
    
    
    
    (2
    )
    
    
    23
    
    
    
    (227
    )Global workplace solutions
    
    
    12
    
    
    
    10
    
    
    
    27
    
    
    
    24Europe
    
    
    2
    
    
    
    12
    
    
    
    (14
    )
    
    
    36Rest of world
    
    
    66
    
    
    
    49
    
    
    
    140
    
    
    
    124190
    
    
    
    190
    
    
    
    398
    
    
    
    259Automotive experienceNorth America
    
    
    97
    
    
    
    (34
    )
    
    
    293
    
    
    
    (370
    )Europe
    
    
    49
    
    
    
    3
    
    
    
    110
    
    
    
    (238
    )Asia
    
    
    25
    
    
    
    17
    
    
    
    78
    
    
    
    (10
    )171
    
    
    
    (14
    )
    
    
    481
    
    
    
    (618
    )Power solutions
    
    
    135
    
    
    
    106
    
    
    
    450
    
    
    
    212Total segment income (loss)
    
    $
    496
    
    
    $
    282
    
    
    $
    1,329
    
    
    $
    (147
    )Net financing charges
    
    
    (39
    )
    
    
    (65
    )
    
    
    (117
    )
    
    
    (167
    )Restructuring costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (230
    )Income (loss) before income taxes
    
    $
    457
    
    
    $
    217
    
    
    $
    1,212
    
    
    $
    (544
    )
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Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)
 19.
    
    Commitments and Contingencies
 The Company accrues for potential environmental losses in a manner consistent with U.S. GAAP; that
is, when it is probable a loss has been incurred and the amount of the loss is reasonably
estimable. 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 has no reason to believe at the present time 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.The Company is involved in a number of product liability and various other suits incident to the
operation of its businesses. Insurance coverages are maintained and estimated costs are recorded
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.
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PricewaterhouseCoopers LLP
 
 Report of Independent Registered Public Accounting Firm
 
      
 38




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Cautionary Statements for Forward-Looking Information
   Overview
      39




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Outlook
  Liquidity and Capital Resources
    40




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Segment Analysis
  Summary
 Three Months Ended
    
    
    
    
    
    Nine Months EndedJune 30,
    
    
    
    
    
    June 30,(in millions)
    
    2010
    
    2009
    
    Change
    
    2010
    
    2009
    
    ChangeNet sales
    
    $
    8,540
    
    
    $
    6,979
    
    
    
    22
    %
    
    $
    25,265
    
    
    $
    20,630
    
    
    
    22
    %Segment income
    
    
    496
    
    
    
    282
    
    
    
    76
    %
    
    
    1,329
    
    
    
    (147
    )
    
    
    
    *
 
 *
    
    Measure not meaningful Three Months:
 
    
    The $1.6 billion increase in consolidated net sales was primarily due to higher sales in
the automotive experience business ($1.3 billion) as a result of increased industry
production levels by our major original equipment manufacturers (OEMs), higher sales
volumes in the power solutions business ($255 million) and higher global workplace
solutions, rest of world and unitary products demand in the building efficiency business
($118 million), partially offset by lower sales volumes in the other building efficiency
businesses ($81 million) and the unfavorable impact of foreign currency translation ($62
million).
    
    The $214 million increase in segment income was primarily due to higher volumes in the
automotive experience and power solutions businesses, favorable operating costs in the
automotive experience North America and Europe segments and favorable overall margin rates
in the building efficiency business, partially offset by higher selling, general and
administrative expenses and the unfavorable effects of foreign currency translation ($10
million).
 Year-to-Date:
 
    
    The $4.6 billion increase in consolidated net sales was primarily due to higher sales in
the automotive experience business ($3.7 billion) as a result of increased industry
production levels by our major OEMs, the favorable impact of foreign currency translation
($670 million), higher sales volumes in the power solutions business ($587 million) and
higher global workplace solutions and unitary products demand in the building efficiency
business ($292 million), partially offset by lower sales volumes in the other building
efficiency businesses ($615 million).
    
    The $1.5 billion increase in segment income was primarily due to higher volumes in the
automotive experience and power solutions businesses, favorable operating and purchasing
costs in the automotive experience North America and Europe segments, favorable overall
margin rates in the building efficiency business, impairment charges recorded in the prior
year on an equity investment in the building efficiency North America unitary products
segment ($152 million), fixed asset impairment charges recorded in the prior year in the
automotive experience North America and Europe segments ($77 million and $33 million,
respectively) and the favorable effects of foreign currency translation ($14 million),
partially offset by lower overall volumes in the building efficiency businesses and higher
selling, general and administrative expenses.
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Building Efficiency  Net Sales
 Net Sales
    
    
    
    
    
    
    Net SalesThree Months Ended
    
    
    
    
    
    
    Nine Months EndedJune 30,
    
    
    
    
    
    
    June 30,(in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    ChangeNorth America systems
    
    $
    551
    
    
    $
    563
    
    
    
    -2
    %
    
    $
    1,552
    
    
    $
    1,671
    
    
    
    -7
    %North America service
    
    
    531
    
    
    
    552
    
    
    
    -4
    %
    
    
    1,505
    
    
    
    1,610
    
    
    
    -7
    %North America unitary
products
    
    
    243
    
    
    
    227
    
    
    
    7
    %
    
    
    574
    
    
    
    477
    
    
    
    20
    %Global workplace solutions
    
    
    787
    
    
    
    708
    
    
    
    11
    %
    
    
    2,404
    
    
    
    2,095
    
    
    
    15
    %Europe
    
    
    457
    
    
    
    517
    
    
    
    -12
    %
    
    
    1,409
    
    
    
    1,587
    
    
    
    -11
    %Rest of world
    
    
    648
    
    
    
    600
    
    
    
    8
    %
    
    
    1,764
    
    
    
    1,779
    
    
    
    -1
    %$
    3,217
    
    
    $
    3,167
    
    
    
    2
    %
    
    $
    9,208
    
    
    $
    9,219
    
    
    
    0
    %
 Three Months:
 
    
    The decrease in North America systems was primarily due to lower volumes of equipment in
the commercial construction and replacement markets ($17 million) partially offset by the
favorable impact from foreign currency translation ($5 million).
    
    The decrease in North America service was primarily due to lower truck-based business
($58 million) partially offset by higher volumes in energy solutions ($31 million) and the
favorable impact of foreign currency translation ($6 million).
    
    The increase in North America unitary products was primarily due to recovery in the U.S.
residential market ($14 million) and the favorable impact of foreign currency translation
($2 million).
    
    The increase in global workplace solutions was primarily due to the impact of increased
demand from existing and new customers ($72 million) and the favorable impact of foreign
currency translation ($7 million).
    
    The decrease in Europe was primarily due to lower volumes across the region ($37
million) and the unfavorable impact of foreign currency translation ($23 million).
    
    The increase in rest of world was primarily due to volume increases in the Latin America
($18 million), Asia ($16 million) and Middle East ($3 million) and the favorable impact of
foreign currency translation ($16 million), partially offset by volume decreases in other
global businesses ($5 million).
 Year-to-Date:
 
    
    The decrease in North America systems was primarily due to lower volumes of control
systems and equipment in the commercial construction and replacement markets ($137 million)
partially offset by the favorable impact from foreign currency translation ($18 million).
    
    The decrease in North America service was primarily due to lower truck-based business
($156 million) partially offset by higher volumes in energy solutions ($31 million) and the
favorable impact of foreign currency translation ($20 million).
    
    The increase in North America unitary products was primarily due to increases in the
U.S. residential market ($91 million) and the favorable impact of foreign currency
translation ($6 million).
    
    The increase in global workplace solutions was primarily due to the impact of increased
demand from existing and new customers ($201 million) and the favorable impact of foreign
currency translation ($108 million).
    
    The decrease in Europe was primarily due to lower volumes across the region ($269
million) partially offset by the favorable impact of foreign currency translation ($91
million).
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##### Table of Contents




    
    The decrease in rest of world was primarily due to volume decreases in Middle East ($39
million), Latin America ($25 million) and other global businesses ($23 million), partially
offset by favorable impact of foreign currency translation ($69 million) and volume
increases in Asia ($3 million).
 Building Efficiency  Segment Income
 Segment Income
    
    
    
    
    
    
    Segment IncomeThree Months Ended
    
    
    
    
    
    
    Nine Months EndedJune 30,
    
    
    
    
    
    
    June 30,(in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    ChangeNorth America systems
    
    $
    74
    
    
    $
    63
    
    
    
    17
    %
    
    $
    180
    
    
    $
    173
    
    
    
    4
    %North America service
    
    
    20
    
    
    
    58
    
    
    
    -66
    %
    
    
    42
    
    
    
    129
    
    
    
    -67
    %North America unitary
products
    
    
    16
    
    
    
    (2
    )
    
    
    
    *
    
    
    23
    
    
    
    (227
    )
    
    
    
    *Global workplace solutions
    
    
    12
    
    
    
    10
    
    
    
    20
    %
    
    
    27
    
    
    
    24
    
    
    
    13
    %Europe
    
    
    2
    
    
    
    12
    
    
    
    -83
    %
    
    
    (14
    )
    
    
    36
    
    
    
    
    *Rest of world
    
    
    66
    
    
    
    49
    
    
    
    35
    %
    
    
    140
    
    
    
    124
    
    
    
    13
    %$
    190
    
    
    $
    190
    
    
    
    0
    %
    
    $
    398
    
    
    $
    259
    
    
    
    54
    %
 
 *
    
    Measure not meaningful Three Months:
 
    
    The increase in North America systems was primarily due to favorable margin rates ($14
million) and the favorable impact of foreign currency translation ($1 million), partially
offset by lower volumes ($4 million).
    
    The decrease in North America service was primarily due to information technology
implementation costs ($15 million), lower volumes in truck-based services ($10 million),
higher selling, general and administrative expenses ($7 million) related in part to
investments in energy solutions and unfavorable margin rates ($5 million), partially offset
by the favorable impact of foreign currency translation ($1 million).
    
    The increase in North America unitary products was primarily due to favorable volumes
and margin rates ($22 million), partially offset by higher selling, general, and
administrative expenses ($3 million).
    
    The increase in global workplace solutions was primarily due to higher volumes ($6
million) partially offset by unfavorable margin rates ($4 million).
    
    The decrease in Europe was primarily due to lower sales volumes ($11 million), higher
selling, general and administrative expenses ($1 million) and the unfavorable impact of
foreign currency translation ($1 million), partially offset by favorable margin rates ($3
million).
    
    The increase in rest of world was primarily due to favorable margin rates ($16 million)
and higher volumes ($8 million), partially offset by higher selling, general and
administrative expenses ($6 million) as a result of investments in emerging markets and
engineering and the unfavorable impact of foreign currency translation ($2 million).
 Year-to-Date:
 
    
    The increase in North America systems was primarily due to favorable margin rates ($28
million), lower selling, general and administrative expenses ($12 million) and the
favorable impact of foreign currency translation ($3 million), partially offset by lower
volumes ($25 million) and reserves for existing customers ($11 million).
    
    The decrease in North America service was primarily due to inventory adjustments and
information technology implementation costs ($43 million), lower volumes in truck-based
services ($34 million),
 43




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##### Table of Contents




    
    The increase in North America unitary products was primarily due to impairment charges
recorded on an equity investment in the prior year first quarter ($152 million), favorable
volumes and margin rates ($67 million), prior year inventory related charges ($20 million)
and lower selling, general, and administrative expenses ($9 million).
    
    The increase in global workplace solutions was primarily due to higher volumes ($13
million) and the favorable impact of foreign currency translation ($2 million), partially
offset by unfavorable margin rates ($7 million) and higher selling, general, and
administrative expenses ($3 million).
    
    The decrease in Europe was primarily due to lower sales volumes ($63 million) partially
offset by lower selling, general and administrative expenses ($10 million) due in part to
prior year restructuring, the favorable impact of foreign currency translation ($4 million)
and favorable margin rates ($3 million).
    
    The increase in rest of world was primarily due to favorable margin rates ($42 million)
partially offset by lower volumes ($18 million), higher selling, general and administrative
expenses ($6 million) and the unfavorable impact of foreign currency translation ($2
million).
 Automotive Experience  Net Sales
 Net Sales
    
    
    
    
    
    
    Net SalesThree Months Ended
    
    
    
    
    
    
    Nine Months EndedJune 30,
    
    
    
    
    
    
    June 30,(in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    ChangeNorth America
    
    $
    1,740
    
    
    $
    988
    
    
    
    76
    %
    
    $
    4,981
    
    
    $
    3,279
    
    
    
    52
    %Europe
    
    
    2,033
    
    
    
    1,706
    
    
    
    19
    %
    
    
    6,238
    
    
    
    4,478
    
    
    
    39
    %Asia
    
    
    440
    
    
    
    262
    
    
    
    68
    %
    
    
    1,263
    
    
    
    775
    
    
    
    63
    %$
    4,213
    
    
    $
    2,956
    
    
    
    43
    %
    
    $
    12,482
    
    
    $
    8,532
    
    
    
    46
    %
 Three Months:
 
    
    The increase in North America was primarily due to higher industry production volumes by
all of the Companys major OEM customers ($778 million) partially offset by commercial
settlements and pricing ($26 million).
    
    The increase in Europe was primarily due to higher production volumes and new customer
awards ($434 million) partially offset by the unfavorable impact of foreign currency
translation ($93 million) and unfavorable commercial settlements and pricing ($14 million).
    
    The increase in Asia was primarily due to higher production volumes in Japan and Korea
($159 million) and the favorable impact of foreign currency translation ($19 million).
 Year-to-Date:
 
    
    The increase in North America was primarily due to higher industry production volumes by
all of the Companys major OEM customers ($1.7 billion).
    
    The increase in Europe was primarily due to higher production volumes and new customer
awards ($1.6 billion) and the favorable impact of foreign currency translation ($158
million).
    
    The increase in Asia was primarily due to higher production volumes in Japan, Korea,
Thailand and China ($397 million) and the favorable impact of foreign currency translation
($91 million).
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Automotive Experience  Segment Income
 Segment Income
    
    
    
    
    
    
    Segment IncomeThree Months Ended
    
    
    
    
    
    
    Nine Months EndedJune 30,
    
    
    
    
    
    
    June 30,(in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    ChangeNorth America
    
    $
    97
    
    
    $
    (34
    )
    
    
    
    *
    
    $
    293
    
    
    $
    (370
    )
    
    
    
    *Europe
    
    
    49
    
    
    
    3
    
    
    
    
    *
    
    
    110
    
    
    
    (238
    )
    
    
    
    *Asia
    
    
    25
    
    
    
    17
    
    
    
    47
    %
    
    
    78
    
    
    
    (10
    )
    
    
    
    *$
    171
    
    
    $
    (14
    )
    
    
    
    *
    
    $
    481
    
    
    $
    (618
    )
    
    
    
    *
 
 *
    
    Measure not meaningful Three Months:
 
    
    The increase in North America was primarily due to higher industry production volumes
($157 million), favorable operating costs ($33 million) and higher equity income ($4
million), partially offset by higher engineering expenses ($30 million), purchasing and
commercial costs ($28 million) and higher selling, general and administrative costs ($5
million).
    
    The increase in Europe was primarily due to higher production volumes ($71 million),
favorable operating costs ($16 million) and favorable purchasing costs ($6 million),
partially offset by higher prior year commercial recoveries ($23 million), the unfavorable
impact of foreign currency translation ($11 million), higher engineering expenses ($8
million) and higher selling, general and administrative costs ($5 million).
    
    The increase in Asia was primarily due to higher production volumes ($18 million) and
higher equity income at our joint ventures mainly in China ($11 million), partially offset
by an impairment charge on a headquarters building in Japan ($11 million), commercial costs
($6 million) and higher selling, general and administrative costs ($3 million).
 Year-to-Date:
 
    
    The increase in North America was primarily due to higher industry production volumes
($366 million), favorable operating costs ($145 million), favorable purchasing and
commercial costs ($89 million), an impairment charge on fixed assets recorded in the prior
year first quarter ($77 million) and higher equity income ($26 million), partially offset
by higher engineering expenses ($30 million) and higher selling, general and administration
costs ($13 million).
    
    The increase in Europe was primarily due to higher production volumes ($260 million),
favorable purchasing costs ($61 million), favorable operating costs ($57 million) and an
impairment charge on fixed assets recorded in the prior year first quarter ($33 million),
partially offset by higher prior year commercial recoveries ($43 million), higher
engineering expenses ($17 million) and the unfavorable impact of foreign currency
translation ($2 million).
    
    The increase in Asia was primarily due to higher equity income at our joint ventures
mainly in China ($56 million), higher production volumes ($54 million) and the favorable
impact of foreign currency translation ($1 million), partially offset by an impairment
charge on a headquarters building in Japan ($11 million), commercial costs ($6 million) and
higher selling, general and administrative costs ($3 million).
 45




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Power Solutions
 Three Months Ended
    
    
    
    
    
    Nine Months EndedJune 30,
    
    
    
    
    
    June 30,(in millions)
    
    2010
    
    2009
    
    Change
    
    2010
    
    2009
    
    ChangeNet sales
    
    $
    1,110
    
    
    $
    856
    
    
    
    30
    %
    
    $
    3,575
    
    
    $
    2,879
    
    
    
    24
    %Segment income
    
    
    135
    
    
    
    106
    
    
    
    27
    %
    
    
    450
    
    
    
    212
    
    
    
    
    *
 
 *
    
    Measure not meaningful Three Months:
 
    
    Net sales increased primarily due to higher sales volumes ($142 million) and the impact
of higher lead costs on pricing ($114 million), partially offset by unfavorable
price/product mix ($1 million) and the unfavorable impact of foreign currency translation
($1 million).
    
    Segment income increased primarily due to higher sales volumes ($32 million),
prior year disposal of a former manufacturing facility in Europe and other assets ($15
million), and the favorable impact of foreign currency translation ($2 million), partially
offset by higher selling, general and administrative costs ($14 million) and unfavorable
net lead and other commodity costs net of pricing ($8 million).
 Year-to-Date:
 
    
    Net sales increased primarily due to higher sales volumes ($362 million), the impact of
higher lead costs on pricing ($227 million) and the favorable impact of foreign currency
translation ($109 million), partially offset by unfavorable price/product mix ($2 million).
    
    Segment income increased primarily due to higher sales volumes ($142 million),
prior year disposal of a former manufacturing facility in Europe and other assets ($15
million), the favorable impact of foreign currency translation ($6 million) and favorable
net lead and other commodity costs net of pricing ($110 million), which includes a prior
year $62 million out of period adjustment as discussed in Note 1, Financial Statements,
to the financial statements. Partially offsetting these factors were higher selling,
general and administrative costs ($39 million).
 Restructuring Costs
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Net Financing Charges
 Three Months Ended
    
    
    
    
    
    Nine Months EndedJune 30,
    
    
    
    
    
    June 30,(in millions)
    
    2010
    
    2009
    
    Change
    
    2010
    
    2009
    
    ChangeNet financing charges
    
    $
    39
    
    
    $
    65
    
    
    
    -40
    %
    
    $
    117
    
    
    $
    167
    
    
    
    -30
    %
 
    
    The decrease in net financing charges for the three and nine month periods ended June 30,
2010 was primarily due to lower debt levels, including the conversion of the Companys
convertible senior notes and Equity Units in September 2009, and lower interest rates in the
current periods.
 47




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Provision for Income Taxes
 Three Months Ended
    
    Nine Months EndedJune 30,
    
    June 30,(in millions)
    
    2010
    
    2009
    
    2010
    
    2009Tax provision
    
    $
    31
    
    
    $
    50
    
    
    $
    123
    
    
    $
    109Effective tax rate
    
    
    6.8
    %
    
    
    23.0
    %
    
    
    10.2
    %
    
    
    -20.0
    %Estimated annual base effective tax rate
    
    
    18.0
    %
    
    
    27.0
    %
    
    
    18.0
    %
    
    
    27.0
    %
 
    
    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 annual 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.
    
    In the current fiscal quarter, the Companys estimated annual effective income tax
rate for continuing operations remained at 18%.
    
    In the third quarter of fiscal 2010, the Company determined that it was more likely
than not that the deferred tax assets within a Slovakia automotive entity would be utilized.
Therefore, the Company released $13 million of valuation allowances in the three month period
ended June 30, 2010.
    
    Based on recently published case law in a non-U.S. jurisdiction and the settlement of a
tax audit during the third quarter of fiscal 2010, the Company released net $38 million of
reserves for uncertain tax positions, including interest and penalties.
    
    In the second quarter of fiscal 2010, the Company recorded a noncash charge of
approximately $18 million due to law changes related to the tax treatment of the Medicare Part
D subsidy due to passage of comprehensive health care reform legislation under the Patient
Protection and Affordable Care Act (HR3590).
    
    In the first quarter of fiscal 2010, the Company determined that it is more likely than not
that a portion of the deferred tax assets in Brazil would be utilized. Therefore, the Company
released $69 million of valuation allowances. This was comprised of a $93 million decrease in
income tax expense offset by a $24 million reduction in cumulative translation adjustments.
    
    As a result of certain recent events related to prior year tax planning initiatives, during
the first quarter of fiscal 2010, the Company increased the reserve for uncertain tax
positions by $31 million, including $26 million of interest and penalties, which impacts the
effective tax rate.
    
    In the third quarter of fiscal 2009, the Company decreased its estimated annual effective
income tax rate for continuing operations from 31% to 27%, primarily due to a geographical
shift in income and global tax planning initiatives. Because there was a cumulative
year-to-date loss, this created a tax expense increase of $11 million in the third quarter of
fiscal 2009 after applying the new effective rate to the provision in the prior two quarters.
    
    In the third quarter of fiscal 2009, 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 within the Brazil power solutions entity would be utilized.
Therefore, the Company released $10 million of valuation allowances in the three month period
ended June 30, 2009. This was comprised of a $3 million decrease in income tax expense with
the remaining amount impacting the statement of financial position.
    
    In the third quarter of fiscal 2009, as a result of various entities exiting business in
certain jurisdictions and certain recent events related to prior tax planning initiatives, the
Company reduced the reserve for uncertain tax positions by $33 million. This was comprised of
a $17 million decrease to tax expense and a $16 million decrease to goodwill.
    
    In the second quarter of fiscal 2009, 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
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Company determined that it was more likely than not that the deferred tax asset associated with
a capital loss would be utilized. Therefore, the Company released $45 million of valuation
allowances against the income tax provision in the three month period ended March 31, 2009.
    
    In the second quarter of fiscal 2009, the Company recorded a $27 million discrete period
tax adjustment related to second quarter restructuring costs using a blended statutory tax
rate of 19.2%.
    
    In the second quarter of fiscal 2009, the Company filed a claim for refund with the
Internal Revenue Service related to interest computations of prior tax payments and refunds.
The refund claim resulted in a tax provision decrease of $6 million.
    
    In the second quarter of fiscal 2009, the tax provision decreased as a result of $30
million tax benefit realized by a change in tax status of a French subsidiary.
    
    In the first quarter of fiscal 2009, the Company performed an analysis of its worldwide
deferred tax assets. As a result of the rapid deterioration of operating results in various
jurisdictions including France, Mexico, Spain and the United Kingdom, it was determined that
it was more likely than not that the deferred tax assets would not be utilized. Therefore, the
Company recorded a $300 million valuation allowance as income tax expense.
    
    In the first quarter of fiscal 2009, the Company recorded a $30 million discrete period tax
adjustment related to first quarter 2009 impairment costs using a blended statutory tax rate
of 12.6%. Due to the tax rate change in the second quarter of fiscal 2009, the discrete period
tax adjustment increased by $18 million for a total tax adjustment of the six months ended
March 31, 2009 of $48 million.
 Income Attributable to Noncontrolling Interests
 Three Months Ended
    
    
    
    
    
    Nine Months EndedJune 30,
    
    
    
    
    
    June 30,(in millions)
    
    2010
    
    2009
    
    Change
    
    2010
    
    2009
    
    ChangeIncome (loss) attributable to
noncontrolling interests
    
    $
    8
    
    
    $
    4
    
    
    
    100
    %
    
    $
    47
    
    
    $
    (15
    )
    
    
    *
 
 *
    
    Measure not meaningful 
    
    The increase in income attributable to noncontrolling interests for the three and nine
month periods ended June 30, 2010 was primarily due to earnings at certain automotive
experience joint ventures in North America and Asia.
 Net Income Attributable to Johnson Controls, Inc.
 Three Months Ended
    
    
    
    
    
    Nine Months EndedJune 30,
    
    
    
    
    
    June 30,(in millions)
    
    2010
    
    2009
    
    Change
    
    2010
    
    2009
    
    ChangeNet income (loss) attributable to
Johnson Controls, Inc.
    
    $
    418
    
    
    $
    163
    
    
    
    *
    
    
    $
    1,042
    
    
    $
    (638
    )
    
    
    *
 
 *
    
    Measure not meaningful 
    
    The increase in net income attributable to Johnson Controls, Inc. for the three months
ended June 30, 2010 was primarily due to higher volumes in the automotive experience and power
solutions businesses, favorable operating costs in the automotive experience North America and
Europe segments, favorable overall margin rates in the building efficiency business, lower net
financing charges and a decrease in the provision for income
taxes, partially offset by higher selling, general and administrative expenses, higher income
attributable to noncontrolling interests and the unfavorable effects of foreign currency
translation.
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
    
    The increase in net income attributable to Johnson Controls, Inc. for the nine months ended
June 30, 2010 was primarily due to higher volumes in the automotive experience and power
solutions businesses, favorable operating and purchasing costs in the automotive experience
North America and Europe segments, favorable overall margin rates in the building efficiency
business, impairment charges recorded in the prior year on an equity investment in the
building efficiency North America unitary products segment, fixed asset impairment charges
recorded in the prior year in the automotive experience North America and Europe segments,
restructuring charges recorded in the prior year, lower net financing charges and the
favorable effects of foreign currency translation, partially offset by lower overall volumes
in the building efficiency business, higher selling, general and administrative expenses, an
increase in the provision for income taxes and higher income attributable to noncontrolling
interests.
 Backlog
  Financial Condition
 Working Capital
 June 30,
    
    September 30,
    
    
    
    
    
    June 30,(in millions)
    
    2010
    
    2009
    
    Change
    
    2009
    
    ChangeWorking capital
    
    $
    905
    
    
    $
    1,147
    
    
    
    -21
    %
    
    $
    1,030
    
    
    
    -12
    %Accounts receivable
    
    
    5,452
    
    
    
    5,528
    
    
    
    -1
    %
    
    
    4,910
    
    
    
    11
    %Inventories
    
    
    1,644
    
    
    
    1,521
    
    
    
    8
    %
    
    
    1,561
    
    
    
    5
    %Accounts payable
    
    
    4,874
    
    
    
    4,434
    
    
    
    10
    %
    
    
    3,741
    
    
    
    30
    %
 
    
    The Company defines working capital as current assets less current liabilities, excluding
cash, short-term debt, the current portion of long-term debt and net assets of discontinued
operations. Management believes that this measure of working capital, which excludes
financing-related items and discontinued activities, provides a more useful measurement of the
Companys operating performance.
    
    The decrease in working capital as compared to September 30, 2009 was primarily due to
lower accounts receivable from improved collections and higher accounts payable primarily due
to increased purchasing activity, partially offset by higher inventory levels to support
higher sales and a decrease in restructuring reserves. Compared to June 30, 2009, the decrease
was primarily due to higher accounts payable primarily due to increased purchasing activity
partially offset by higher accounts receivable from higher sales, higher inventory levels to
support higher sales and a decrease in restructuring reserves.
    
    The Companys days sales in accounts receivable for the three months ended June 30, 2010
were 54, lower than 58 for the comparable periods ended September 30, 2009 and June 30, 2009.
The decrease in accounts receivable compared to September 30, 2009 was primarily due to
improved collections. The increase in accounts receivable compared to June 30, 2009 was
primarily due to higher sales volumes in the current quarter as compared to the same quarter
in the prior year. There has been no significant adverse change in the level of overdue
receivables or changes in revenue recognition methods.
    
    The Companys inventory turns for the three months ended June 30, 2010 were consistent with
the period ended September 30, 2009. Inventory turns were higher compared to the three months
ended June 30, 2009, primarily due to increased sales volumes and improvements in inventory
management.
    
    Days in accounts payable at June 30, 2010 decreased to 69 days from 72 days at September
30, 2009 and 71 days at June 30, 2009 primarily due to the timing of supplier payments.
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Cash Flows
 Three Months Ended
    
    Nine Months EndedJune 30,
    
    June 30,(in millions)
    
    2010
    
    2009
    
    2010
    
    2009Cash provided by operating activities
    
    $
    427
    
    
    $
    494
    
    
    $
    1,448
    
    
    $
    359Cash used by investing activities
    
    
    (285
    )
    
    
    (139
    )
    
    
    (655
    )
    
    
    (674
    )Cash provided (used) by financing activities
    
    
    (4
    )
    
    
    (123
    )
    
    
    (646
    )
    
    
    474Capital expenditures
    
    
    (215
    )
    
    
    (103
    )
    
    
    (526
    )
    
    
    (529
    )
 
    
    The decrease in cash provided by operating activities for the three months ended June 30,
2010 was primarily due to unfavorable working capital changes in accounts receivable and
inventory, partially offset by higher net income attributable to Johnson Controls, Inc. and
favorable working capital changes in accounts payable. The increase in cash provided by
operating activities for the nine months ended June 30, 2010 was primarily due to higher net
income attributable to Johnson Controls, Inc. and favorable working capital changes in
accounts payable and accrued income taxes, partially offset by unfavorable working capital
changes in accounts receivable, inventory and restructuring reserves.
    
    The increase in cash used by investing activities for the three months ended June 30, 2010
was primarily due to higher capital expenditures, acquisition of businesses and an increase in
long-term investments in the current period. For the nine months ended June 30, 2010, the
decrease in cash used by investing activities was primarily due to a decrease in long-term
investments and increase in sales of property, plant and equipment in the current period,
partially offset by the impact of settlement of cross-currency interest rate swaps in the
prior year.
    
    The decrease in cash used by financing activities for the three months ended June 30, 2010
was primarily due to the translation of foreign denominated cash balances. The increase in
cash used by financing activities for the nine months ended June 30, 2010 was primarily due to
a decrease in overall debt levels.
    
    The increase in capital expenditures for the three months ended June 30, 2010 and the
decrease in capital expenditures for the nine months ended June 30, 2010 were primarily due to
the timing of payments for investments made across the businesses.
 Deferred Taxes
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Long-Lived Assets
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Capitalization
 June 30,
    
    
    September 30,
    
    
    
    
    
    
    June 30,(in millions)
    
    2010
    
    
    2009
    
    
    Change
    
    
    2009
    
    
    ChangeTotal debt
    
    $
    3,365
    
    
    $
    3,966
    
    
    
    -15
    %
    
    $
    4,778
    
    
    
    -30
    %Shareholders equity
attributable to Johnson Controls, Inc.
    
    
    9,395
    
    
    
    9,100
    
    
    
    3
    %
    
    
    8,178
    
    
    
    15
    %Total capitalization
    
    $
    12,760
    
    
    $
    13,066
    
    
    
    -2
    %
    
    $
    12,956
    
    
    
    -2
    %Total debt as a % of
total capitalization
    
    
    26
    %
    
    
    30
    %
    
    
    
    
    
    
    37
    %
 
    
    In fiscal 2008, the Company entered into new committed, revolving credit facilities
totaling 350 million euro with 100 million euro expiring in May 2009, 150 million euro
expiring in May 2011 and 100 million euro expiring in August 2011. In May 2009, the 100
million euro revolving facility expired and the Company entered into a new one year committed,
revolving credit facility in the amount of 50 million euro expiring in May 2010. In May 2010,
the 50 million euro revolving facility expired and the Company entered into a new one year
committed, revolving credit facility in the amount of 50 million euro expiring in May 2011. At
June 30, 2010, there were no draws on the revolving credit facilities.
    
    In January 2009, the Company retired its 24 billion yen, three year, floating rate loan
agreement that matured. The Company used proceeds from commercial paper issuances to repay the
loan agreement.
    
    In February 2009, the Company entered into a $50 million, three year, floating rate
bilateral loan agreement. The Company drew the entire amount under the loan agreement during
the course of the second quarter of fiscal 2009. Also during the second quarter of fiscal
2009, the Company retired approximately $54 million in principal amount of its $800 million
fixed rate bonds that mature in January 2011. The Company used proceeds from the $50 million
floating rate loan agreement to retire the bonds. The Company retired the loan during the
fourth quarter of fiscal 2009.
    
    In March 2009, the Company closed concurrent public offerings. The Company issued $402.5
million aggregate amount of 6.5% senior, unsecured, fixed rate convertible notes that mature
September 30, 2012. The notes are convertible into shares of the Companys common stock at a
conversion rate of 89.3855 shares of common stock per $1,000 principal amount of notes, which
is equal to a conversion price of approximately $11.19 per share, subject to anti-dilution
adjustments. The Company also issued nine million Equity Units (the Equity Units) each of
which has a stated amount of $50 in an aggregate principal amount of $450 million. The Equity
Units consist of (i) a forward purchase contract obligating the holder to purchase from the
Company for a price in cash of $50, on the purchase contract settlement date of March 31,
2012, subject to early settlement, a certain number of
shares of the Companys common stock and (ii) a 1/20, or 5%, undivided beneficial ownership
interest in $1,000 principal amount of the Companys 11.5% subordinated notes due 2042.
    
    In September 2009, the Company settled the results of its previously announced offer to
exchange (a) any and all of its outstanding 6.5% convertible senior notes due 2012 for the
following consideration per $1,000 principal amount of convertible senior notes: (i) 89.3855
shares of the Companys common stock, (ii) a cash payment of $120 and (iii) accrued and unpaid
interest on the convertible senior notes to, but excluding, the settlement date, payable in
cash. Upon settlement of the exchange offer, approximately $400 million aggregate principal
amount of convertible senior notes were exchanged for approximately 36 million shares of
common stock and approximately $61 million in cash ($48 million of debt conversion payments
and $13 million of accrued interest on the convertible senior notes). As a result of the
exchange, in the fourth quarter of fiscal 2009 the Company recognized approximately $57
million of debt conversion expenses within its consolidated
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statement of income which was
comprised of $48 million of debt conversion costs on the exchange and a $9 million charge
related to the write-off of unamortized debt issuance costs.
 
    
    In September 2009, the Company settled the results of its previously announced offer to
exchange up to 8,550,000 of its nine million outstanding Equity Units in the form of Corporate
Units (the Corporate Units) comprised of a purchase contract obligating the holder to
purchase from the Company shares of its common stock and a 1/20, or 5%, undivided beneficial
ownership interest in $1,000 principal amount of the Companys 11.50% subordinated notes due
2042, for the following consideration per Corporate Unit: (i) 4.8579 shares of the Companys
common stock, (ii) a cash payment of $6.50 and (iii) a distribution consisting of the pro rata
share of accrued and unpaid interest on the subordinated notes to, but excluding, the
settlement date, payable in cash. Upon settlement of the exchange offer, approximately
8,082,085 Corporate Units (consisting of $404 million aggregate principal amount of
outstanding 11.50% subordinated notes due 2042) were exchanged for approximately 39 million
shares of common stock and approximately $65 million in cash ($52 million of debt conversion
payments and $13 million of accrued interest payments on the subordinated notes). As a result
of the exchange, in the fourth quarter of fiscal 2009 the Company recognized approximately $54
million of debt conversion expenses within its consolidated statement of income which was
comprised of $53 million of debt conversion costs on the exchange and a $1 million charge
related to the write-off of unamortized debt issuance costs.
    
    In November 2009, the Company repurchased 670 bonds ($670,000 par value) of its 6.5%
convertible notes maturing September 30, 2012. The Company used cash to fund the repurchase.
    
    In December 2009, the Company repurchased an additional 1,015 bonds ($1,015,000 par value)
of its 6.5% convertible notes maturing September 30, 2012. The Company used cash to fund the
repurchase.
    
    In December 2009, the Company retired its 7 billion yen, three year, floating rate loan
agreement that was scheduled to mature on January 18, 2011. The Company used cash to repay the
note.
    
    In December 2009, the Company retired its 12 billion yen, three year, floating rate loan
agreement that matured. The Company used cash to repay the note.
    
    In December 2009 the Company retired approximately $13 million in principal amount of its
fixed rate bonds that was scheduled to mature on January 15, 2011. The Company used cash to
fund the repurchase.
    
    In February 2010, the Company retired approximately $30 million in principal amount of its
fixed rate bonds that was scheduled to mature on January 15, 2011. The Company used cash to
fund the repurchase.
    
    In February 2010, the Company retired its 18 billion yen, three year, floating rate loan
agreement that was scheduled to mature on January 18, 2011. The Company used cash to repay the
note.
    
    In March 2010, the Company issued $500 million aggregate principal amount of 5.0% senior
unsecured fixed rate notes due in fiscal 2020. Net proceeds from the issue were used for
general corporate purposes including the retirement of short-term debt.
    
    In March 2010, the Company retired approximately $31 million in principal amount of its
fixed rate bonds that was scheduled to mature on January 15, 2011. The Company used cash to
fund the repurchase.
    
    In April 2010, a total of 200 bonds ($200,000 par value) of 6.5% convertible senior notes
scheduled to mature on September 30, 2012 were redeemed for Johnson Controls, Inc. common
stock.
    
    In May 2010, the Company retired approximately $18 million in principal amount of its fixed
rate bonds scheduled to mature on January 15, 2011. The Company used cash to fund the
repurchases.
    
    The Company also selectively makes use of short-term credit lines. The Company estimates
that, as of June 30, 2010, it could borrow up to $2.0 billion at its current debt ratings on
committed and uncommitted credit lines.
    
    The Company believes its capital resources and liquidity position at June 30, 2010 are
adequate to meet projected needs. The Company believes requirements for working capital,
capital expenditures, dividends, minimum pension contributions, debt maturities and any
potential acquisitions in fiscal 2010 will continue to be funded from operations, supplemented
by short- and long-term borrowings, if required. The Company currently manages its short-term
debt position in the U.S. and euro commercial paper markets and bank loan markets. In the
event the Company is unable to issue commercial paper, it would have the ability to draw on
its $2.05
 55




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billion revolving credit facility, which extends until December 2011. There were no
draws on the revolving credit facility as of June 30, 2010. The Company does not have any
significant debt maturities until the second quarter of fiscal 2011. As such, the Company
believes it has sufficient financial resources to fund operations and meet its obligations for
the foreseeable future.
 
    
    The Companys debt financial covenants require a minimum consolidated shareholders equity
attributable to Johnson Controls, Inc. of at least $1.31 billion at all times and allow a
maximum aggregated amount of 10% of consolidated shareholders equity attributable to Johnson
Controls, Inc. for liens and pledges. For purposes of calculating the Companys covenants,
consolidated shareholders equity attributable to Johnson Controls, Inc. is calculated without
giving effect to (i) the application of ASC 715-60, Defined Benefit Plans- Other
Postretirement, or (ii) the cumulative foreign currency translation adjustment. As of June
30, 2010, consolidated shareholders equity attributable to Johnson Controls, Inc. as defined
per our covenants was $9.4 billion and there were no outstanding amounts for liens and
pledges. The Company expects to remain in compliance with all covenants and other requirements
set forth in its credit agreements and indentures for the foreseeable future. None of the
Companys debt agreements limit access to stated borrowing levels or require accelerated
repayment in the event of a decrease in the Companys credit rating.
 New Accounting Standards
      56




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Other Financial Information
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  57




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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
     
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   58




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Approximate DollarTotal Number of
    
    Value of Shares thatShares Purchased as
    
    May Yet beTotal Number of
    
    Average Price
    
    Part of the Publicly
    
    Purchased under thePeriod
    
    Shares Purchased
    
    Paid per Share
    
    Announced Program
    
    Programs4/1/10 - 4/30/10Purchases by Company (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    102,394,7135/1/10 - 5/31/10Purchases by Company (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    102,394,7136/1/10 - 6/30/10Purchases by Company (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    102,394,7134/1/10 - 4/30/10Purchases by Citibank
    
    
    250,000
    
    
    $
    33.82
    
    
    
    
    
    
    NA5/1/10 - 5/31/10Purchases by Citibank
    
    
    
    
    
    
    
    
    
    
    
    
    
    NA6/1/10 - 6/30/10Purchases by Citibank
    
    
    
    
    
    
    
    
    
    
    
    
    
    NA
 
 (1)
    
    The repurchases of the Companys common stock by the Company are intended to partially
offset dilution related to
our stock option and restricted stock equity compensation plans and are treated as repurchases of
Company common
stock for purposes of this disclosure. 
 ITEM 6. EXHIBITS
  59




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SIGNATURES
  JOHNSON CONTROLS, INC.Date:  August 3, 2010
    By:
    /s/ R. Bruce McDonaldR. Bruce McDonaldExecutive Vice President and
Chief Financial Officer 60




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##### Table of Contents



JOHNSON CONTROLS, INC.
 Form 10-Q
 INDEX TO EXHIBITS
 Exhibit No.
    
    Description10.Y
    
    Form of employment agreement
between Johnson Controls, Inc. and all elected officers and named
executives hired after July 28, 2010, as amended and restated July
28, 2010, filed herewith.*15
    
    Letter of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, dated
August 3, 2010, relating to Financial Information.31.1
    
    Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.32
    
    Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101
    
    The following materials from Johnson Controls, Inc.s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2010, formatted in XBRL (Extensible Business Reporting Language): (i)
the Condensed Consolidated Statements of Financial Position, (ii) the Consolidated Statements
of Income, (iii) the Condensed Consolidated Statements of Cash Flow, and (iv) Notes to
Condensed Consolidated Financial Statements, furnished herewith.**
 
 *
    
    Denotes a management contract or compensatory plan.**
    
    The Company will be furnishing Exhibit 101 within 30 days of the filing date of this Form 10-Q,
as allowed under the rules of the Securities and Exchange Commission. 61