JOHNSON CONTROLS INC (Form: 10-Q, Received: 08/03/2010 10:44:16)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


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


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. Employer
Incorporation or Organization)		Identification No.)

5757 North Green Bay Avenue
Milwaukee, 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)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

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


Class		Shares Outstanding at June 30, 2010
Common Stock: $0.01 7/18 par value per share		673,311,804

JOHNSON CONTROLS, INC

FORM 10-Q

Report Index


	Page
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Financial Position at June 30, 2010, September 30, 2009 and June 30, 2009		3
Consolidated Statements of Income for the Three and Nine Month Periods Ended June 30, 2010 and 2009		4
Condensed Consolidated Statements of Cash Flows for the Three and Nine Month Periods Ended June 30, 2010 and 2009		5
Notes to Condensed Consolidated Financial Statements		6
Report of Independent Registered Public Accounting Firm		38
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		39
Item 3. Quantitative and Qualitative Disclosures About Market Risk		57
Item 4. Controls and Procedures		57

Part II. Other Information
Item 1. Legal Proceedings		58
Item 1A. Risk Factors		58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		58
Item 6. Exhibits		59

Signatures		60
EX-10.Y
EX-15
EX-31.1
EX-31.2
EX-32

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Johnson Controls, Inc.

Condensed Consolidated Statements of Financial Position
(in millions; unaudited)


	June 30,		September 30,		June 30,
	2010		2009		2009
Assets

Cash and cash equivalents	$	908	$	761	$	543
Accounts receivable — net		5,452		5,528		4,910
Inventories		1,644		1,521		1,561
Other current assets		2,114		2,016		1,725

Current assets		10,118		9,826		8,739


Property, plant and equipment — net		3,706		3,986		3,969
Goodwill		6,217		6,542		6,420
Other intangible assets — net		695		746		745
Investments in partially-owned affiliates		766		718		713
Other noncurrent assets		2,584		2,270		1,880

Total assets	$	24,086	$	24,088	$	22,466


Liabilities and Equity

Short-term debt	$	73	$	658	$	605
Current portion of long-term debt		654		140		172
Accounts payable		4,874		4,434		3,741
Accrued compensation and benefits		1,054		872		892
Other current liabilities		2,377		2,612		2,533

Current liabilities		9,032		8,716		7,943


Long-term debt		2,638		3,168		4,001
Postretirement health and other benefits		206		255		217
Other noncurrent liabilities		2,565		2,610		1,876

Long-term liabilities		5,409		6,033		6,094


Commitments and contingencies (Note 19)

Redeemable noncontrolling interests		163		155		168

Shareholders’ equity attributable to Johnson Controls, Inc.		9,395		9,100		8,178
Noncontrolling interests		87		84		83

Total equity		9,482		9,184		8,261

Total liabilities and equity	$	24,086	$	24,088	$	22,466

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

Johnson Controls, Inc.

Consolidated Statements of Income
(in millions, except per share data; unaudited)


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Net sales
Products and systems*	$	6,798		$	5,304		$	20,116		$	15,668
Services*		1,742			1,675			5,149			4,962

		8,540			6,979			25,265			20,630
Cost of sales
Products and systems		5,783			4,608			17,254			14,243
Services		1,418			1,332			4,213			3,981

		7,201			5,940			21,467			18,224


Gross profit		1,339			1,039			3,798			2,406

Selling, 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			109


Net 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 share
Basic	$	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.

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

Johnson Controls, Inc.

Condensed Consolidated Statements of Cash Flows
(in millions; unaudited)


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Operating Activities
Net 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			535
Amortization of intangibles		10			8			32			26
Equity in earnings of partially-owned affiliates, net of dividends received		6			(4	)		(38	)		207
Deferred income taxes		(51	)		(20	)		(95	)		202
Impairment charges		11			—			30			156
Equity-based compensation		8			19			37			47
Other		9			28			42			42
Changes in working capital, excluding acquisitions:
Accounts receivable		(182	)		(27	)		(218	)		1,297
Inventories		(111	)		135			(208	)		476
Other 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			359


Investing Activities
Capital expenditures		(215	)		(103	)		(526	)		(529	)
Sale of property, plant and equipment		10			5			34			8
Acquisition of businesses, net of cash acquired		(17	)		—			(32	)		(32	)
Recoverable customer engineering expenditures		(18	)		(20	)		(56	)		(68	)
Settlement of cross-currency interest rate swaps		—			—			—			31
Changes in long-term investments		(45	)		(21	)		(75	)		(84	)

Cash used by investing activities		(285	)		(139	)		(655	)		(674	)


Financing Activities
Increase (decrease) in short-term debt — net		10			(23	)		(569	)		164
Increase in long-term debt		6			2			519			880
Repayment 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			3
Other		76			(18	)		135			(2	)

Cash provided (used) by financing activities		(4	)		(123	)		(646	)		474


Increase in cash and cash equivalents	$	138		$	232		$	147		$	159

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

Johnson Controls, Inc.

Notes to Condensed Consolidated Financial Statements

June 30, 2010

(unaudited)

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):

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)


	June 30,		September 30,		June 30,
	2010		2009		2009
Current assets	$	187	$	146	$	116
Noncurrent assets		72		101		106

Total assets	$	259	$	247	$	222


Current liabilities	$	165	$	103	$	76
Noncurrent liabilities		—		—		—

Total liabilities	$	165	$	103	$	76

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

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.

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.

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.

Inventories

Inventories consisted of the following (in millions):


	June 30,			September 30,			June 30,
	2010			2009			2009
Raw materials and supplies	$	787		$	712		$	711
Work-in-process		254			225			213
Finished goods		693			674			721

FIFO inventories		1,734			1,611			1,645
LIFO reserve		(90	)		(90	)		(84	)

Inventories	$	1,644		$	1,521		$	1,561

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)

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):


					Currency
	June 30,		Business		Translation and			September 30,
	2009		Acquisitions		Other			2009
Building efficiency
North America systems	$	515	$	—	$	10		$	525
North America service		658		—		10			668
North America unitary products		483		—		7			490
Global workplace solutions		173		—		1			174
Europe		419		—		(11	)		408
Rest of world		549		—		38			587
Automotive experience
North America		1,378		—		(2	)		1,376
Europe		1,173		2		36			1,211
Asia		204		—		19			223
Power solutions		868		—		12			880

Total	$	6,420	$	2	$	120		$	6,542


					Currency
	September 30,		Business		Translation and			June 30,
	2009		Acquisitions		Other			2010
Building efficiency
North America systems	$	525	$	—	$	1		$	526
North America service		668		4		—			672
North America unitary products		490		—		—			490
Global workplace solutions		174		—		(5	)		169
Europe		408		—		(69	)		339
Rest of world		587		—		(13	)		574
Automotive experience
North America		1,376		—		1			1,377
Europe		1,211		1		(190	)		1,022
Asia		223		—		(5	)		218
Power solutions		880		—		(50	)		830

Total	$	6,542	$	5	$	(330	)	$	6,217

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, 2009
	Gross							Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated					Carrying		Accumulated
	Amount		Amortization			Net		Amount		Amortization			Net		Amount		Amortization			Net
Amortized intangible assets
Patented technology	$	266	$	(180	)	$	86	$	308	$	(190	)	$	118	$	303	$	(181	)	$	122
Customer relationships		344		(64	)		280		345		(56	)		289		343		(51	)		292
Miscellaneous		63		(28	)		35		67		(25	)		42		59		(25	)		34

Total amortized intangible assets		673		(272	)		401		720		(271	)		449		705		(257	)		448
Unamortized intangible assets
Trademarks		294		—			294		297		—			297		297		—			297

Total 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.

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.

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 Ended
	June 30,
	2010			2009
Balance at beginning of period	$	344		$	204
Accruals for warranties issued during the period		169			163
Accruals from acquisitions		2			—
Accruals related to pre-existing warranties (including changes in estimates)		(1	)		4
Settlements made (in cash or in kind) during the period		(184	)		(155	)
Currency translation		(9	)		(4	)

Balance at end of period	$	321		$	212

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.

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):


	Employee
	Severance and
	Termination						Currency
	Benefits			Other			Translation			Total
Balance at September 30, 2009	$	140		$	2		$	8		$	150
Noncash adjustment — underspend		(15	)		—			—			(15	)
Noncash adjustment — revised actions		15			—			—			15
Utilized — cash		(22	)		—			—			(22	)
Utilized — noncash		—			(2	)		(1	)		(3	)

Balance at December 31, 2009	$	118		$	—		$	7		$	125
Noncash adjustment — underspend		(22	)		—			—			(22	)
Utilized — cash		(20	)		—			—			(20	)
Utilized — noncash		—			—			(8	)		(8	)

Balance at March 31, 2010	$	76		$	—		$	(1	)	$	75
Utilized — 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.

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):


	Employee
	Severance and
	Termination			Fixed Asset			Currency
	Benefits			Impairment			Translation			Total
Balance at September 30, 2009	$	215		$	—		$	(18	)	$	197
Utilized — cash		(36	)		—			—			(36	)
Utilized — noncash		—			—			(1	)		(1	)

Balance at December 31, 2009	$	179		$	—		$	(19	)	$	160
Noncash adjustment — underspend		(32	)		—			—			(32	)
Noncash adjustment — revised actions		35			19			—			54
Utilized — cash		(27	)		—			—			(27	)
Utilized — noncash		—			(19	)		(8	)		(27	)

Balance at March 31, 2010	$	155		$	—		$	(27	)	$	128
Utilized — 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.

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)

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 Ended
	June 30,						June 30,
	2010			2009			2010			2009
Federal, 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	)		252
Restructuring charges		—			—			—			18
Impairment charges		—			—			—			39
Uncertain 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 Rate*

		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 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 Allowance*

		The 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.

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 Charge*

		In 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 Charges*

		In 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.

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)

		*Uncertain Tax Positions*

		At 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 of
Jurisdiction		Limitations

Austria		5 years
Belgium		3 years
Brazil		5 years
Canada		5 years
China		3 to 5 years
Czech Republic		3 years
France		3 years
Germany		4 to 5 years
Italy		4 years
Japan		5 to 7 years
Mexico		5 years
Spain		4 years
United Kingdom		6 years
United States — Federal		3 years
United States – State		3 to 5 years

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 Covered

Austria		2003 – 2005
Belgium		2005 – 2008
Brazil		2005 – 2008
Canada		2004 – 2006
France		2002 – 2009
Germany		2001 – 2007
Italy		2005 – 2007
Mexico		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. Subsidiary*

		For 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 Refund*

		The 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 Legislation*

		On 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.

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 Plans
	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Service cost	$	16		$	17		$	50		$	50
Interest cost		38			40			114			119
Expected return on plan assets		(44	)		(45	)		(134	)		(134	)
Amortization of net actuarial loss		8			1			22			3
Amortization of prior service cost		—			—			1			1

Net periodic benefit cost	$	18		$	13		$	53		$	39


	Non-U.S. Pension Plans
	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Service cost	$	9		$	8		$	28		$	23
Interest cost		16			16			51			48
Expected return on plan assets		(15	)		(13	)		(47	)		(39	)
Amortization of net actuarial loss		3			1			8			3
Amortization of prior service cost		—			1			—			1
Settlement loss		—			—			1			—

Net periodic benefit cost	$	13		$	13		$	41		$	36


	Postretirement Health and Other Benefits
	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Service cost	$	1		$	1		$	3		$	3
Interest cost		4			5			11			14
Amortization of net actuarial gain		—			(1	)		—			(2	)
Amortization of prior service credit		(4	)		(2	)		(13	)		(5	)

Net periodic benefit cost	$	1		$	3		$	1		$	10

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

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.

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 Ended
	June 30,				June 30,
	2010		2009		2010		2009
Income Available to Common Shareholders
Basic 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 Outstanding
Basic weighted average shares outstanding		672.7		594.7		671.6		593.9
Effect 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		593.9


Antidilutive Securities
Options 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.

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, 2009
	Equity			Equity						Equity			Equity
	Attributable to			Attributable to						Attributable to			Attributable to
	Johnson			Noncontrolling						Johnson			Noncontrolling
	Controls, Inc.			Interests			Total Equity			Controls, Inc.			Interests			Total Equity
Beginning balance, March 31	$	9,378		$	96		$	9,474		$	7,855		$	76		$	7,931
Total comprehensive income (loss):
Net income (loss)		418			(5	)		413			163			10			173
Foreign currency translation adjustments		(322	)		(2	)		(324	)		194			2			196
Realized and unrealized gains (losses) on derivatives		(14	)		—			(14	)		28			—			28
Unrealized losses on marketable common stock		(2	)		—			(2	)		—			—			—
Employee retirement plans		5			—			5			—			—			—

Other comprehensive income (loss)		(333	)		(2	)		(335	)		222			2			224

Comprehensive income (loss)		85			(7	)		78			385			12			397

Other 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			21

Ending balance, June 30	$	9,395		$	87		$	9,482		$	8,178		$	83		$	8,261

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)


	Nine Months Ended June 30, 2010									Nine Months Ended June 30, 2009
	Equity			Equity						Equity			Equity
	Attributable to			Attributable to						Attributable to			Attributable to
	Johnson			Noncontrolling						Johnson			Noncontrolling
	Controls, Inc.			Interests			Total Equity			Controls, Inc.			Interests			Total Equity
Beginning balance, September 30	$	9,100		$	84		$	9,184		$	9,406		$	77		$	9,483
Total 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			—			30
Unrealized 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			26

Ending 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 Ended
	June 30, 2010			June 30, 2009
Beginning balance, March 31	$	153		$	168
Net income (loss)		13			(6	)
Foreign currency translation adjustments		(3	)		1
Redemption value adjustment		—			5

Ending balance, June 30	$	163		$	168

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)


	Nine Months Ended			Nine Months Ended
	June 30, 2010			June 30, 2009
Beginning balance, September 30	$	155		$	177
Net income (loss)		22			(35	)
Foreign currency translation adjustments		(5	)		(3	)
Dividends attributable to noncontrolling interests		—			(2	)
Redemption value adjustment		(9	)		31

Ending 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:

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)


		Volume Outstanding as of
Commodity	Units	June 30, 2010		September 30, 2009		June 30, 2009
Copper	Pounds		16,735,000		12,180,000		10,350,000
Lead	Metric Tons		25,961		—		2,250
Polypropylene	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.

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 Designated
	Hedging Instruments under ASC 815						as Hedging Instruments under ASC 815
	June 30,		September 30,		June 30,		June 30,		September 30,		June 30,
	2010		2009		2009		2010		2009		2009
Other current assets
Foreign currency exchange derivatives	$	14	$	40	$	19	$	9	$	36	$	14
Commodity derivatives		2		7		2		—		—		—
Other noncurrent assets
Interest rate swaps		9		5		—		—		—		—
Equity swap		—		—		—		91		70		45
Foreign currency exchange derivatives		1		1		2		1		1		1

Total assets	$	26	$	53	$	23	$	101	$	107	$	60


Current portion of long-term debt
Net investment hedges	$	—	$	134	$	126	$	—	$	—	$	—
Fixed rate debt swapped to floating		594		—		—		—		—		—
Other current liabilities
Foreign currency exchange derivatives		15		44		24		8		27		—
Commodity derivatives		8		1		11		—		—		—
Net investment hedges		7		—		—		—		—		—
Long-term debt
Fixed rate debt swapped to floating		404		704		—		—		—		—
Net investment hedges		—		278		262		—		—		—
Other noncurrent liabilities
Foreign currency exchange derivatives		2		1		2		1		1		2

Total liabilities	$	1,030	$	1,162	$	425	$	9	$	28	$	2

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

June 30, 2010

Location of Gain

Amount of Gain

(Loss) Reclassified

Location of Gain

Amount of Gain

(Loss) Recognized in

from AOCI into

(Loss) Recognized in

Derivatives in ASC 815 Cash Flow

OCI on Derivative

Income (Effective

Income on Derivative

Hedging Relationships

(Effective Portion)

Portion)

(Ineffective Portion)

Foreign currency exchange derivatives

)

Cost of sales

—

Commodity derivatives

)

Cost of sales

)

Cost of sales

—

Total

)

—

Nine Months Ended

June 30, 2010

Location of Gain

Amount of Gain

(Loss) Reclassified

Location of Gain

Amount of Gain

from AOCI into

(Loss) Recognized in

Derivatives in ASC 815 Cash Flow

Income (Effective

Income on Derivative

Hedging Relationships

Portion)

(Ineffective Portion)

Foreign currency exchange derivatives

Cost of sales

)

Cost of sales

—

Commodity derivatives

Cost of sales

—

Total

)

—

As of

Three Months Ended

June 30, 2009

Location of Gain

Amount of Gain

(Loss) Reclassified

Location of Gain

Amount of Gain

(Loss) Recognized in

from AOCI into

(Loss) Recognized in

Derivatives in ASC 815 Cash Flow

OCI on Derivative

Income (Effective

Income on Derivative

Hedging Relationships

(Effective Portion)

Portion)

(Ineffective Portion)

Foreign currency exchange derivatives

)

Net sales

)

Net sales

—

Commodity derivatives

)

Cost of sales

(24

)

Cost of sales

)

Total

(12

)

(30

)

Six Months Ended

June 30, 2009

Location of Gain

Amount of Gain

(Loss) Reclassified

Location of Gain

Amount of Gain

from AOCI into

(Loss) Recognized in

Derivatives in ASC 815 Cash Flow

Income (Effective

Income on Derivative

Hedging Relationships

Portion)

(Ineffective Portion)

Foreign currency exchange derivatives

Net sales

(13

)

Net sales

—

Commodity derivatives

Cost of sales

(70

)

Cost of sales

)

Total

(83

)


	As of			As of
	June 30, 2010			June 30, 2009
	Amount of Gain			Amount of Gain
	(Loss) Recognized in			(Loss) Recognized in
	CTA on Outstanding			CTA on Outstanding
Hedging Activities in ASC 815 Net	Derivatives (Effective			Derivatives (Effective
Investment 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.

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)


		Three Months Ended			Nine Months Ended
		June 30, 2010			June 30, 2010
		Amount 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 on
Relationships	Derivative	Derivative			Derivative
Interest rate swap	Net financing charges	$	4		$	4
Fixed rate debt swapped to floating	Net financing charges		(1	)		5

Total		$	3		$	9


		Three Months Ended		Six Months Ended
		June 30, 2009		June 30, 2009
		Amount 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 on
Relationships	Derivative	Derivative		Derivative
Interest rate swap	Net financing charges	$	—	$	—
Fixed rate debt swapped to floating	Net financing charges		—		—

Total		$	—	$	—


		Three Months Ended			Nine Months Ended
		June 30, 2010			June 30, 2010
		Amount 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 on
Instruments under ASC 815	Derivative	Derivative			Derivative
Foreign currency exchange derivatives	Cost of sales	$	110		$	198
Foreign currency exchange derivatives	Net financing charges		(103	)		(160	)
Equity swap	Selling, general and administrative expenses		(21	)		2
Commodity derivatives	Cost of sales		1			1

Total		$	(13	)	$	41


		Three Months Ended			Six Months Ended
		June 30, 2009			June 30, 2009
		Amount 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 on
Instruments under ASC 815	Derivative	Derivative			Derivative
Foreign currency exchange derivatives	Cost of sales	$	(10	)	$	(86	)
Foreign currency exchange derivatives	Net financing charges		23			102
Equity swap	Selling, general and administrative expenses		16			20
Commodity 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.

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 Measurements

		The 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:
					Significant
			Quoted Prices		Other
			in Active		Observable		Significant
	Total as of		Markets		Inputs		Unobservable Inputs
	June 30, 2010		(Level 1)		(Level 2)		(Level 3)
Other current assets
Foreign currency exchange derivatives	$	23	$	23	$	—	$	—
Commodity derivatives		2		—		2		—
Other noncurrent assets
Interest 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 debt
Fixed rate debt swapped to floating	$	594	$	—	$	594	$	—
Other current liabilities
Foreign currency exchange derivatives		23		23		—		—
Cross-currency interest rate swaps		7		—		7		—
Commodity derivatives		8		—		8		—
Long-term debt
Fixed rate debt swapped to floating		404		—		404		—
Other noncurrent liabilities
Foreign currency exchange derivatives		3		3		—		—

Total	$	1,039	$	26	$	1,013	$	—

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)


	Fair Value Measurements Using:
					Significant
			Quoted Prices		Other		Significant
			in Active		Observable		Unobservable
	Total as of		Markets		Inputs		Inputs
	September 30, 2009		(Level 1)		(Level 2)		(Level 3)
Other current assets
Foreign currency exchange derivatives	$	76	$	76	$	—	$	—
Commodity derivatives		7		—		7		—
Other noncurrent assets
Interest rate swaps		5		—		5		—
Equity swap		70		70		—		—
Foreign currency exchange derivatives		2		2		—		—

Total	$	160	$	148	$	12	$	—

Current portion long-term debt
Foreign currency denominated debt	$	134	$	134	$	—	$	—
Other current liabilities
Foreign currency exchange derivatives		71		71		—		—
Commodity derivatives		1		—		1		—
Long-term debt
Fixed rate debt swapped to floating		704		—		704		—
Foreign currency denominated debt		278		278		—		—
Other noncurrent liabilities
Foreign currency exchange derivatives		2		2		—		—

Total	$	1,190	$	485	$	705	$	—

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)


	Fair Value Measurements Using:
					Significant
			Quoted Prices		Other		Significant
			in Active		Observable		Unobservable
	Total as of		Markets		Inputs		Inputs
	June 30, 2009		(Level 1)		(Level 2)		(Level 3)
Other current assets
Foreign currency exchange derivatives	$	33	$	33	$	—	$	—
Commodity derivatives		2		—		2		—
Other noncurrent assets
Equity swap		45		45		—		—
Foreign currency exchange derivatives		3		3		—		—

Total	$	83	$	81	$	2	$	—

Current portion long-term debt
Foreign currency denominated debt	$	126	$	126	$	—	$	—
Other current liabilities
Foreign currency exchange derivatives		24		24		—		—
Commodity derivatives		11		—		11		—
Long-term debt
Foreign currency denominated debt		262		262		—		—
Other noncurrent liabilities
Foreign currency exchange derivatives		4		4		—		—

Total	$	427	$	416	$	11	$	—

		Valuation Methods

		Foreign 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

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.

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.

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 efficiency*

		Building 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.

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)

		*Automotive experience*

		Automotive 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 solutions*

		Power 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 Sales
	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2010		2009		2010		2009
Building efficiency
North America systems	$	551	$	563	$	1,552	$	1,671
North America service		531		552		1,505		1,610
North America unitary products		243		227		574		477
Global workplace solutions		787		708		2,404		2,095
Europe		457		517		1,409		1,587
Rest of world		648		600		1,764		1,779

		3,217		3,167		9,208		9,219

Automotive experience
North America		1,740		988		4,981		3,279
Europe		2,033		1,706		6,238		4,478
Asia		440		262		1,263		775

		4,213		2,956		12,482		8,532

Power solutions		1,110		856		3,575		2,879

Total net sales	$	8,540	$	6,979	$	25,265	$	20,630

Johnson Controls, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 2010
(unaudited)


	Segment Income
	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Building efficiency
North America systems	$	74		$	63		$	180		$	173
North America service		20			58			42			129
North America unitary products		16			(2	)		23			(227	)
Global workplace solutions		12			10			27			24
Europe		2			12			(14	)		36
Rest of world		66			49			140			124

		190			190			398			259

Automotive experience
North America		97			(34	)		293			(370	)
Europe		49			3			110			(238	)
Asia		25			17			78			(10	)

		171			(14	)		481			(618	)

Power solutions		135			106			450			212

Total 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	)

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.

PricewaterhouseCoopers LLP
100 E. Wisconsin Ave., Suite 1800
Milwaukee WI 53202
Telephone (414) 212 1600

Report of Independent Registered Public Accounting Firm

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

We have reviewed the accompanying condensed consolidated statements of financial position of Johnson Controls, Inc. and its subsidiaries (the “Company”) as of June 30, 2010 and 2009, and the related consolidated statements of income and the condensed consolidated statements of cash flows for the three-month and nine-month periods ended June 30, 2010 and 2009. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position as of September 30, 2009, and the related consolidated statements of income, shareholders’ equity, and cash flows for the year then ended (not presented herein), and in our report dated November 24, 2009 we expressed an unqualified opinion on those consolidated financial statements. An explanatory paragraph was included in our report for the adoption of guidance included in Accounting Standards Codification (ASC) 740, “Income Taxes,” prescribing how a company should recognize, measure, present, and disclose uncertain tax positions. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of September 30, 2009, is fairly stated in all material respects in relation to the consolidated statement of financial position from which it has been derived.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
August 3, 2010

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

Cautionary Statements for Forward-Looking Information

Unless otherwise indicated, references to “Johnson Controls,” the “Company,” “we,” “our” and “us” in this Quarterly Report on Form 10-Q refer to Johnson Controls, Inc. and its consolidated subsidiaries.

Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “forecast,” “outlook,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” “guidance” or the negative thereof or variations thereon or similar terminology generally intended to identify forward-looking statements. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” of our Annual Report on Form 10-K for the year ended September 30, 2009. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

Johnson Controls brings ingenuity to the places where people live, work and travel. By integrating technologies, products and services, we create smart environments that redefine the relationships between people and their surroundings. We strive to create a more comfortable, safe and sustainable world through our products and services to millions of vehicles, homes and commercial buildings. Johnson Controls provides innovative automotive interiors that help make driving more comfortable, safe and enjoyable. For buildings, we offer products and services that optimize energy use and improve comfort and security. We also provide batteries for automobiles and hybrid electric vehicles, along with related systems engineering, marketing and service expertise.

Johnson Controls was originally incorporated in the state of Wisconsin in 1885 as Johnson Electric Service Company to manufacture, install and service automatic temperature regulation systems for buildings. The Company was renamed to Johnson Controls, Inc. in 1974. In 1978, we acquired Globe-Union, Inc., a Wisconsin-based manufacturer of automotive batteries for both the replacement and original equipment markets. We entered the automotive seating industry in 1985 with the acquisition of Michigan-based Hoover Universal, Inc.

Our building efficiency business is a global market leader in designing, producing, marketing and installing integrated heating, ventilating and air conditioning (HVAC) systems, building management systems, controls, security and mechanical equipment. In addition, the building efficiency business provides technical services, energy management consulting and operations of entire real estate portfolios for the non-residential buildings market. We also provide residential air conditioning and heating systems.

Our automotive experience business is one of the world’s largest automotive suppliers, providing innovative interior systems through our design and engineering expertise. Our technologies extend into virtually every area of the interior including seating and overhead systems, door systems, floor consoles, instrument panels, cockpits and integrated electronics. Customers include most of the world’s major automakers.

Our power solutions business is a leading global supplier of lead-acid automotive batteries for virtually every type of passenger car, light truck and utility vehicle. We serve both automotive original equipment manufacturers and the general vehicle battery aftermarket. We offer Absorbent Glass Mat (AGM) and lithium-ion battery technologies to power hybrid vehicles.

The following information should be read in conjunction with the September 30, 2009 consolidated financial statements and notes thereto, along with management’s discussion and analysis of financial condition and results of operations included in the Company’s 2009 Annual Report on Form 10-K. References in the following discussion and analysis to “Three Months” refer to the three months ended June 30, 2010 compared to the three months ended June 30, 2009, while references to “Year-to-Date” refer to the nine months ended June 30, 2010 compared to the nine months ended June 30, 2009.

Outlook

On July 23, 2010, the Company updated its fiscal 2010 guidance. The Company expects fiscal 2010 net sales to increase to $33.5 billion, which would represent an 18% increase from prior year net sales, based on anticipated higher vehicle production, increased power solutions aftermarket volumes and year over year growth in building efficiency. Automotive experience segment margins for fiscal 2010 are expected to be 3.6% — 3.7%, building efficiency segment margins are expected to be 5.2% — 5.4% and power solutions segment margins are expected to be 12.6% — 12.8%. Earnings, excluding the impact of one-time tax items, are expected to increase to approximately $1.95 per diluted share, which is higher than fiscal 2009, primarily based on profitable conversion of increased net sales.

Liquidity and Capital Resources

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. The Company continues to adjust its commercial paper maturities and issuance levels given market reactions to industry events and changes in the Company’s credit rating. In the event the Company is unable to issue commercial paper, it would have the ability to draw on its $2.05 billion revolving credit facility, which extends until December 2011. 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 Accounting Standards Codification (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 the Company’s debt financial 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.

The key financial assumptions used in calculating the pension liability are determined annually, or whenever plan assets and liabilities are re-measured as required under accounting principles generally accepted in the U.S., including the expected rate of return on our plan assets. The Company’s most recent actuarial valuation utilized an expected rate of return of 8.5% and an average of 6.0% for U.S. and non-U.S. plans, respectively. Any differences between actual results and the expected long-term asset returns will be reflected in other comprehensive income and amortized to pension expense in future years. During the first nine months of fiscal 2010, the Company has made approximately $224 million in total pension contributions. The Company expects to contribute approximately $300 million in cash to its defined benefit pension plans in fiscal 2010.

Segment Analysis

Management evaluates the performance of its business units based primarily on segment income, which is defined as income from continuing operations before income taxes and noncontrolling interests excluding net financing charges and restructuring costs.

Summary


	Three Months Ended							Nine Months Ended
	June 30,							June 30,
(in millions)	2010		2009		Change			2010		2009			Change
Net 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.

Building Efficiency — Net Sales


	Net Sales							Net Sales
	Three Months Ended							Nine Months Ended
	June 30,							June 30,
(in millions)	2010		2009		Change			2010		2009		Change
North 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).

•

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 Income
	Three Months Ended								Nine Months Ended
	June 30,								June 30,
(in millions)	2010		2009			Change			2010			2009			Change
North 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),

unfavorable margin rates ($5 million) and higher selling, general and administrative expenses ($3 million), partially offset by the favorable impact of foreign currency translation ($2 million).

	•		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 Sales
	Three Months Ended							Nine Months Ended
	June 30,							June 30,
(in millions)	2010		2009		Change			2010		2009		Change
North 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).

Automotive Experience — Segment Income


	Segment Income								Segment Income
	Three Months Ended								Nine Months Ended
	June 30,								June 30,
(in millions)	2010		2009			Change			2010		2009			Change
North 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).

Power Solutions


	Three Months Ended							Nine Months Ended
	June 30,							June 30,
(in millions)	2010		2009		Change			2010		2009		Change
Net 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

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.

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.

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.

Net Financing Charges


	Three Months Ended							Nine Months Ended
	June 30,							June 30,
(in millions)	2010		2009		Change			2010		2009		Change
Net 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.

Provision for Income Taxes


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
(in millions)	2010			2009			2010			2009
Tax provision	$	31		$	50		$	123		$	109
Effective 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

		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 Ended
	June 30,							June 30,
(in millions)	2010		2009		Change			2010		2009			Change
Income (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 Ended
	June 30,						June 30,
(in millions)	2010		2009		Change		2010		2009			Change
Net 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.

•

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

Building efficiency’s backlog relates to its control systems and service activity. At June 30, 2010, the unearned backlog was $4.4 billion, or a 1% increase compared to June 30, 2009 including and excluding the minimal negative impact of foreign currency. The North America systems, North America service and rest of world backlog increased compared to prior year levels, while there was a decline in Europe.

Financial Condition

Working Capital


	June 30,		September 30,					June 30,
(in millions)	2010		2009		Change			2009		Change
Working 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.

Cash Flows


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
(in millions)	2010			2009			2010			2009
Cash provided by operating activities	$	427		$	494		$	1,448		$	359
Cash used by investing activities		(285	)		(139	)		(655	)		(674	)
Cash provided (used) by financing activities		(4	)		(123	)		(646	)		474
Capital 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

The Company reviews its deferred tax asset valuation allowances on a quarterly basis. In determining the potential need for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is 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.

The Company has certain subsidiaries, mainly located in France, Italy, Mexico, Spain, United Kingdom and the United States, which have generated operating and/or capital losses and, in certain circumstances, have limited loss carry forward periods. In accordance with ASC 740, “Income Taxes,” the Company is required to record a valuation allowance when it is more likely than not the Company will not utilize deductible amounts or net operating losses for each legal entity or consolidated group based on the tax rules in the applicable jurisdiction, evaluating both positive and negative historical evidences as well as expected future events and tax planning strategies.

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 is 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.

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, the Company performed an analysis of its worldwide deferred tax assets. 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.

Long-Lived Assets

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.

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.

Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. The Company reviews goodwill for impairment during the fourth fiscal quarter or more frequently if events or changes in circumstances indicate the asset might be impaired. The Company performs impairment reviews for its reporting units, which have been determined to be the Company’s reportable segments, using a fair-value method based on management’s judgments and assumptions or third party valuations. The fair value represents the amount at which a reporting unit could be bought or sold in a current transaction between willing parties on an arms-length basis. In estimating the fair value, the Company uses multiples of earnings based on the average of historical, published multiples of earnings of comparable entities with similar operations and economic characteristics. In

certain instances, the Company uses discounted cash flow analyses to further support the fair value estimates. The estimated fair value is then compared with the carrying amount of the reporting unit, including recorded goodwill. The Company is subject to financial statement risk to the extent that the carrying amount exceeds the estimated fair value. At June 30, 2010, the Company concluded it did not have any triggering events requiring assessment of impairment of goodwill.

Capitalization


	June 30,			September 30,						June 30,
(in millions)	2010			2009			Change			2009			Change
Total 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

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

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

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 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.

Other Financial Information

The interim financial information included in this Quarterly Report on Form 10-Q has not been audited by PricewaterhouseCoopers LLP (PwC). PwC has, however applied limited review procedures in accordance with professional standards for reviews of interim financial information. Accordingly, you should restrict your reliance on their reports on such information. PwC is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their reports on the interim financial information because such reports do not constitute “reports” or “parts” of the registration statements prepared or certified by PwC within the meaning of Sections 7 and 11 of the Securities Act of 1933.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 2010, the Company had not experienced any adverse changes in market risk exposures that materially affected the quantitative and qualitative disclosures presented in the Company’s Annual Report on Form 10-K for the year ended September 30, 2009.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of June 30, 2010 to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure.

Changes in Internal Control Over Financial Reporting

There have been no significant changes in the Company’s internal control over financial reporting during the three months ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As noted in Item 1 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2009, liabilities potentially arise globally under various environmental laws and worker safety laws for activities that are not in compliance with such laws and for the cleanup of sites where Company-related substances have been released into the environment.

Currently, the Company is responding to allegations that it is responsible for performing environmental remediation, or for the repayment of costs spent by governmental entities or others performing remediation, at approximately 46 sites in the United States. Many of these sites are landfills used by the Company in the past for the disposal of waste materials; others are secondary lead smelters and lead recycling sites where the Company returned lead-containing materials for recycling; a few involve the cleanup of Company manufacturing facilities; and the remaining fall into miscellaneous categories. The Company may face similar claims of liability at additional sites in the future. Where potential liabilities are alleged, the Company pursues a course of action intended to mitigate them.

The Company accrues for potential environmental losses in a manner consistent with accounting principles generally accepted in the United States; 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 lawsuits incident to the operation of its businesses. Insurance coverages are maintained and estimated costs are recorded for claims and lawsuits of this nature. It is management’s opinion that none of these will have a material adverse effect on the Company’s financial position, results of operations or cash flows. Costs related to such matters were not material to the periods presented.

ITEM 1A. RISK FACTORS

There have been no material changes to the disclosure regarding risk factors presented in Item 1A to the Company’s Annual Report on Form 10-K for the year ended September 30, 2009.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In September 2006, the Company’s Board of Directors authorized a stock repurchase program to acquire up to $200 million of the Company’s outstanding common stock. Stock repurchases under this program may be made through open market, privately negotiated transactions or otherwise at times and in such amounts as Company management deems appropriate. The stock repurchase program does not have an expiration date and may be amended or terminated by the Board of Directors at any time without prior notice.

The Company entered into an Equity Swap Agreement, dated March 18, 2004 and amended March 3, 2006 and May 16, 2006, with Citibank, N.A. (Citibank). The Company settled the Equity Swap Agreement at the beginning of the second quarter of fiscal 2009. The Company entered into a new Swap Agreement, dated March 13, 2009 (Swap Agreement), at the end of the second quarter of fiscal 2009. The Company selectively uses equity swaps to reduce market risk associated with 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.

In connection with the Swap Agreement, Citibank may purchase unlimited shares of the Company’s stock in the market or in privately negotiated transactions. The Company disclaims that Citibank is an “affiliated purchaser” of the Company as such term is defined in Rule 10b-18(a)(3) under the Securities Exchange Act or that Citibank is purchasing any shares for the Company. The Swap Agreement has no stated expiration date. The net effect of the change in fair value of the Swap Agreement and the change in equity compensation liabilities was not material to the Company’s earnings for the three months ended June 30, 2010.

The following table presents information regarding the repurchase of the Company’s common stock by the Company as part of the publicly announced program and purchases of the Company’s common stock by Citibank in connection with the Swap Agreement during the three months ended June 30, 2010.


							Approximate Dollar
					Total Number of		Value of Shares that
					Shares Purchased as		May Yet be
	Total Number of		Average Price		Part of the Publicly		Purchased under the
Period	Shares Purchased		Paid per Share		Announced Program		Programs

4/1/10 - 4/30/10
Purchases by Company (1)		—		—		—	$	102,394,713
5/1/10 - 5/31/10
Purchases by Company (1)		—		—		—	$	102,394,713
6/1/10 - 6/30/10
Purchases by Company (1)		—		—		—	$	102,394,713

4/1/10 - 4/30/10
Purchases by Citibank		250,000	$	33.82		—	NA
5/1/10 - 5/31/10
Purchases by Citibank		—		—		—	NA
6/1/10 - 6/30/10
Purchases 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

Reference is made to the separate exhibit index contained on page 61 filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	JOHNSON CONTROLS, INC.
Date: August 3, 2010	By:	/s/ R. Bruce McDonald
		R. Bruce McDonald
		Executive Vice President and Chief Financial Officer

JOHNSON CONTROLS, INC.

Form 10-Q

INDEX TO EXHIBITS


Exhibit No.		Description

10.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.

Exhibit 10.Y

JOHNSON CONTROLS, INC.
EXECUTIVE EMPLOYMENT AGREEMENT

In consideration of the employment of the undersigned employee (“Executive”) by Johnson Controls, Inc., or its affiliated companies (“Company”), it is agreed between Executive and Company as follows in lieu of any other agreements or commitments relating to such employment, whether written or oral and whether past or present, unless expressly included or incorporated herein:

1. DUTIES . The Company agrees to employ Executive as a manager with duties and responsibilities which the Company acting either through its Board of Directors or its Chief Executive Officer, its sole discretion believes are appropriate to Executive’s skills, training and experience. Executive agrees to perform such assigned duties by devoting full time, due care, loyalty and best efforts thereto and complying with all applicable laws and the requirements of the Company’s policies and procedures on employee conduct, including but not limited to the Ethics and no-harassment policies.

2. TERM . This Agreement will be for an initial period of one year, and will thereafter automatically renew for successive one-year periods unless terminated as provided in Section 4, replaced or amended as provided in Section 5, or superceded as provided in Section 6.

3. COMPENSATION . Executive shall be paid or be eligible for the base salary, bonuses, and benefits set forth in Exhibit A, subject to the terms and conditions set forth in this Section, Exhibit A and in Section 4. The salary, benefits, and bonuses will be reviewed and adjusted periodically in accordance with the Company’s policies then in existence. Those policies and any benefit and bonus programs may be amended from time to time at the Company’s discretion.

4. TERMINATION . Executive’s employment with the Company may be terminated as follows, and Executive’s sole right to receive compensation, benefits, or bonuses after the termination shall be exclusively as set forth below. At the time of any such termination, upon request of the Company, such Executive agrees to resign in writing from all positions and board memberships of the Company and its subsidiaries and affiliates.

(a) DEATH . If Executive dies during the term of this Agreement, this Agreement shall terminate and the Company shall be obligated to pay a lump sum payment equal to six (6) months of Executive’s monthly base salary to the beneficiaries set out in Exhibit A, or to his estate if no beneficiaries have been designated, no later than thirty (30) days after the date of the Executive’s death. However, all benefit plans or bonuses in effect upon Executive’s death shall operate in accordance with their terms covering death of the Executive or terminate immediately if silent.

(b) DISABILITY . If Executive becomes disabled during the term of this Agreement, the Company may terminate Executive’s employment and this Agreement, and Executive’s sole remedy shall be to the Company’s Short and Long Term Disability Policies in effect at that time and Executive’s “disability” shall be determined in accordance with such plan provisions. All other bonuses and benefits in effect at that time shall operate in accordance with their provisions relating to disability or terminate if there is no such provision.

(c) BY EMPLOYEE . Executive may terminate his or her employment and this Agreement at any time for any reason, including resignation or retirement. All compensation, bonuses, or benefits in effect at that time shall cease as of the date of termination, unless specifically provided otherwise with respect to voluntary terminations in the applicable bonus or benefit policies. Without limiting the Company’s discretion generally, the Company specifically reserves the right to grant or not grant stock options, restricted stock, bonuses or other awards to an employee who has voluntarily terminated employment or announced his intention to do so.

(d) FOR CAUSE . The Company may terminate Executive for theft, dishonesty, fraudulent misconduct, violation of Section 7 or 8 of this Agreement, gross dereliction of duty, grave misconduct injurious to the Company or serious violation of the law or the Company’s policies and procedures on employee conduct. In the event the Company terminates Executive for cause hereunder, the Executive shall not be due any compensation, bonuses or benefits after the Termination Date unless earned in full prior to such date in accordance with the applicable provisions of the plan or plans. The Company, if allowed by law, may set off losses, fines or damages the Executive has caused it as a result of such misconduct.

(e) WITHOUT CAUSE . The Company, acting through its Board of Directors or through its Chief Executive Officer, may terminate Executive for any reason other than as set out in Sec. 4. a. - d. In such an event, Executive shall receive a severance allowance under the Company’s severance policy in effect at that time provided Executive signs a full release in form and substance acceptable to the Company; however, in no event shall such benefits be less than Executive’s base salary for one (1) year or twice the severance payments provided under the then current severance policy, whichever is greater. The severance payment shall be paid in a single sum as soon as practicable, but in no event more than ten (10) business days, following the date of Executive’s separation from service. Executive shall also receive any bonus or benefits in effect at that time under plan provisions for terminations without cause or none if such plans are silent. For purposes hereof, whether Executive has separated from service will be determined pursuant to the provisions of Section 409A of the Internal Revenue Code of 1986, as amended, which will generally occur when the Executive terminates employment from the Company and its affiliates (within the meaning of Section 414(b) and (c) of the Internal Revenue Code of 1986, as amended, provided that the phrase “at least 50 percent” shall be used in place of “at least 80 percent” each place it appears in the regulations thereunder). Executive will be presumed to have terminated employment when the level of bona fide services provided by Executive to the Company and its affiliates permanently decreases to a level of twenty percent (20%) or less of the level of services rendered by Executive, on average, during the immediately preceding 36 months (or such lesser period of service); provided that if Executive takes a leave of absence from the Company or an affiliate for purposes of military leave, sick leave or other bona fide leave of absence. Executive will not be deemed to have a separation from service for the first six (6) months of the leave of absence, or if longer, for so long as Executive’s right to reemployment is provided either by statute or by contract; provided that if the leave of absence is due to Executive’s medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of six (6) months or more, and such impairment causes Executive to be unable to perform the duties of his position with the Company or an affiliate or a substantially similar position of employment, then the leave period may be extended for up to a total of twenty-nine (29) months without causing a separation from service.

5. AMENDMENT . The Company may at any time in its discretion amend, modify or replace this Agreement; however, such changes shall not reduce the benefits provided Executive for termination without cause under Sec. 4.e.

6. CHANGE OF CONTROL . In the event there is a “change of control” in the Company, as such term is defined in the Agreement attached as Exhibit B, then the Agreement set forth in Exhibit B shall supersede and replace this Agreement in all respects.

7. NONCOMPETITION . (a) Executive agrees that for a period of one year after the termination of active employment hereunder, he shall not, except as permitted by the Company’s prior written consent, in any capacity in which Confidential

Information or Trade Secrets of the Company would reasonably be regarded as useful, engage in, be employed by, or in any way advise or act for any business which is a competitor of the Company with respect to the products or services provided by any division or group within the Company to which Executive devoted substantial attention in the year preceding termination of employment with the Company, and within the national and international geographic markets served by any such division or group. This restriction shall also apply to any ownership or other financial interest in such a competitor except the ownership of less than five percent of the shares of any corporation whose shares are listed on a recognized stock exchange or trade in an over-the-counter market. Depending on the scope of Executive’s responsibilities in the year preceding termination of employment with the Company, this covenant could potentially apply to a geographic area coextensive with the Company’s operations, including but not limited to all of North America and the European Economic Community. This covenant shall survive the termination of this Agreement.

(b) REMEDIES . The Executive acknowledges and agrees that the terms of Section 7 and 8: (i) are reasonable in geographic and temporal scope, (ii) are necessary to protect legitimate proprietary and business interests of the Company in, inter alia, near permanent customer relationships and confidential information. The Executive further acknowledges and agrees that (x) the Executive’s breach of the provisions of Section 7 will cause the Company irreparable harm, which cannot be adequately compensated by money damages, and (y) if the Company elects to prevent the Executive from breaching such provisions by obtaining an injunction against the Executive, there is a reasonable probability of the Company’s eventual success on the merits. The Executive consents and agrees that if the Executive commits any such breach or threatens to commit any breach, the Company shall be entitled to temporary and permanent injunctive relief from a court of competent jurisdiction, in addition to, and not in lieu of, such other remedies as may be available to the Company for such breach, including the recovery of money damages. The Parties further acknowledge and agree that the provisions of Section 10(d) below are accurate and necessary because (A) this Agreement is entered into in the State of Wisconsin, (B) as of the Effective Date, Wisconsin will have a substantial relationship to the Parties and to this transaction, (C) as of the date of this Agreement, Wisconsin is the headquarters state of the Company, which has operations globally and has a compelling interest in having its employees treated uniformly, (D) the use of Wisconsin law provides certainty to the Parties in any covenant litigation in the United States, and (E) enforcement of the provision of this Section 7 would not violate any fundamental public policy of Wisconsin or any other jurisdiction. If any of the provisions of Sections 7 or 8 are determined to be wholly or partially unenforceable, the Executive hereby agrees that this Agreement or any provision hereof may be reformed so that it is enforceable to the maximum extent

permitted by law. If any of the provisions of Sections 7 or 8 are determined to be wholly or partially unenforceable in any jurisdiction, such determination shall not be a bar to or in any way diminish the Company’s right to enforce any such covenant in any other jurisdiction.

8. CONFIDENTIAL INFORMATION . (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). During employment and for two years after termination of the Executive’s employment with the Company, the Executive, except as may otherwise be required by law or legal process, shall not use any such information except on behalf of the Company and shall not communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. This covenant shall survive the termination of this Agreement. Nothing in this paragraph is intended or shall be construed to limit in any way Executive’s independent duty not to misappropriate Trade Secrets of the Company.

(b) “Trade Secret” means information of the Company, including a formula, pattern, compilation, program, device, method, technique or process, that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and that is the subject of efforts by the Company to maintain its secrecy that are reasonable under the circumstances. During employment with the Company, Executive shall preserve and protect Trade Secrets of the Company from unauthorized use or disclosure, and after termination of such employment, Executive shall not use or disclose any Trade Secret of the Company until such time as that Trade Secret is no longer a secret as a result of circumstances other than a misappropriation involving the Executive.

9. MANDATORY ARBITRATION . As a condition of his employment with the Company, and in consideration for that employment, Executive agrees that if he has any legal disputes with the Company or its supervisors, managers, directors, or agents concerning his employment or termination of employment, those disputes will be brought and resolved exclusively through binding arbitration. For example, any claims by the Executive that he has been demoted, denied promotion, or discharged because of age discrimination, race discrimination, or unlawful retaliation will be resolved through binding arbitration. Arbitrations involving employment issues under this provision will be conducted pursuant to the terms and conditions of the Company’s Employment Dispute Resolution Program (copy attached), except that use of arbitration under the Program to resolve employment disputes will be mandatory rather than voluntary. Arbitrations under this agreement will be conducted pursuant to the procedural rules established for resolving employment disputes by the American Arbitration Association (copy available). By signing this Agreement, Executive releases and waives any right he has to resolve employment disputes (including claims of unlawful discharge) through filing a lawsuit in court, and agrees instead that the disputes will be resolved exclusively though binding arbitration. Because Executive is giving up the legal right to file a lawsuit against the Company or its supervisors, managers, directors, or agents involving any and all legal disputes arising from his employment or termination of employment, the Company encourages him to consult with an attorney prior to signing this Agreement.

Executive understands that he has twenty-one days to consider whether to sign this agreement. If he signs it, for a period of seven days following the signing he may revoke the agreement. In order to make the revocation effective, he must deliver a signed revocation to the Company within the seven-day revocation period. Notwithstanding the foregoing, Executive agrees that the Company may seek enforcement of Sections 7 and 8 of this Agreement by filing an action in a court of competent jurisdiction seeking temporary, preliminary and permanent injunctive relief and such other relief as may be necessary to protect the Company from threatened, imminent, or existing irreparable harm.

10. MISCELLANEOUS . (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. Executive hereby grants the Company unlimited authority to assign its rights under this Agreement and consents to any and all such assignments.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and at the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

(d) This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

(e) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

To the address appearing immediately below Executive’s signature.

If to the Company:

Johnson Controls, Inc.
5757 North Green Bay Avenue
Milwaukee, WI 53209
Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(f) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(g) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board of Directors, Johnson Controls, Inc. has caused these presents to be executed in its name on its behalf, all as of the day and year written below.



	Executive:

	Address: JOHNSON CONTROLS, INC.
	By:
		Stephen A. Roell, Chairman & CEO

	Date:

JOHNSON CONTROLS, INC.
EXECUTIVE EMPLOYMENT AGREEMENT

EXHIBIT A


Executive:

Base Salary:		$

Benefits:		Executive is eligible to participate in the following benefits provided by Johnson Controls, Inc., in addition to those benefits provided all salaried employees. However, Executive is not assured an award under any such benefit in any year. Each award will be granted each year in accordance with the terms of the benefit plan.

		Annual Incentive Performance Plan

		Long Term Incentive Performance Plan

		Stock Option Plan

		Executive Deferred Compensation Plan

		Restricted Stock Plan

		Retirement Restoration Plan

		Executive Survivor Benefits Plan

		Flexible Perquisites Program

Participation:		Participant is subject to the applicable terms of the plan. In addition to any vesting and/or forfeiture provision that may apply under the applicable plan, the Company reserves the right, at its discretion, to revoke or forfeit some or all of the stock options, restricted stock or other stock based awards with respect to a fiscal year, and/or to pay all, some, or no bonuses with respect to a fiscal year if the Executive voluntarily resigns his/her employment or is discharged for cause prior to the end of the applicable fiscal year. In all other instances, the terms of the respective plans shall apply.

Beneficiaries:		The following beneficiaries will receive death benefits provided under the above benefits unless beneficiaries have been designated under a specific Benefit plan by the Executive. If more than one beneficiary is listed, each beneficiary, if living at the time of payment, will share equally, unless an unequal allocation has been expressly indicated.


		Name:				Relationship


		Name:				Relationship


		Name:				Relationship


		Name:				Relationship

EXHIBIT B

JOHNSON CONTROLS, INC.
CHANGE OF CONTROL
EXECUTIVE EMPLOYMENT AGREEMENT

AGREEMENT by and between Johnson Controls, Inc. a Wisconsin corporation (the “Company”) and Executive Name (the “Executive”), dated .

The Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

11. Certain Definitions.

(a) i. The “Effective Date” shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. (ii) Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive’s employment with the Company is terminated or the Executive ceases to be an officer of the Company prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment or cessation of status as an officer (A) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (B) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the “Effective Date” shall mean the date immediately prior to the date of such termination of employment or cessation of status as an officer.

(b) The “Change of Control Period” shall mean the period commencing on the date hereof and ending on the second anniversary of such date; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), the Change of Control Period shall be automatically extended so as to terminate two years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended.

i. The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however , that the following acquisitions shall not constitute a Change of Control: (I) any acquisition directly from the Company, (II) any acquisition by the Company, (III) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company, or (IV) any acquisition by any corporation pursuant to a transaction that complies with Sections 1(c)(iii)(A), 1(c)(iii)(B) and 1(c)(iii)(C);

ii. Any time at which individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however , that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

iii. Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or an Affiliated Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business

Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

iv. Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

(d) As used in this Agreement, the term “Affiliated Company” or “Affiliated Companies” shall include any company or companies controlled by, controlling or under common control with the Company; provided that when determining when the Executive has experienced a Separation from Service for purposes of this Agreement, control shall be determined pursuant to Code Section 414(b) or 414(c), except that the phrase “at least 50 percent” shall be used in place of the phrase “at least 80 percent” in each place it appears in the regulations thereunder.

(e) “Code” shall mean the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code shall be deemed to include any successor provision thereto.

(f) “Separation from Service” shall mean the Executive’s Termination of Employment, except that if the Executive continues to provide services following his or her Termination of Employment, such later date as is considered a separation from service, within the meaning of Code Section 409A, from the Company and its Affiliated Companies. Specifically, if the Executive continues to provide services to the Company or an Affiliated Company in a capacity other than as an employee, such shift in status is not automatically a Separation from Service.

(g) For purposes of this Agreement, the Executive will be considered a “Specified Employee” if, on the date of the Executive’s Separation from Service, the Executive is a key employee of the Company or an affiliate of the Company (within the meaning of Code Section 414(b) or (c)) any of the stock of which is publicly traded on an established securities market or otherwise. The Executive is considered a key employee for the 12-month period beginning on the first day of the fourth month following the key employee identification date, which is December 31 of each year, such that if the Executive satisfies the requirements for key employee status as of December 31 of a year, the Executive shall be treated as a key employee for the 12-month period beginning April 1 of the following calendar year. The Executive will meet the requirements for key employee status as of December 31 of a year if the Executive meets the requirements of Code Section 416(i)(1)(A)(i), (ii) or (iii), applied in accordance with the regulations under Code Section 416, but disregarding Code Section 416(i)(5), at any time during the 12-month period ending on such December 31. For purposes of determining whether the Executive is a key employee, the definition of compensation under Treasury Regulation § 1.415-2(a) shall be used, applied as if the Company and its affiliates were not using any safe harbor under Treasury Regulation § 1.415-2(d), any of the special timing rules of Treasury Regulation § 1.415-2(e) or any of the special rules provided in Treasury Regulation § 1.415-2(g).

In lieu of the foregoing, if, in the transaction constituting a Change of Control, the Company is merged with or acquired by another entity, and immediately following the Change of Control the stock of either the Company or the acquirer or successor in such transaction is publicly traded on an established securities market or otherwise, then the Executive shall be considered a key employee for the period between the effective date of such transaction and the next specified employee effective date of the acquirer or

survivor if the Executive is on the combined list of the specified employees of each entity participating in the transaction, as re-ordered to identify the top 50 key employees (as well as 1% and 5% owners that are considered key employees) in accordance with Treasury Regulations §1.409A-1(i)(6)(i).

(h) For purposes of this Agreement, the Executive’s “Termination of Employment” (or variations thereof, such as “Terminates Employment” or “Employment Termination”) shall occur when the Executive permanently ceases to perform services for the Company and its Affiliated Companies as an employee or when the level of bona fide services the Executive performs as an employee of the Company and its Affiliated Companies permanently decreases to no more than twenty percent (20%) of the average level of bona fide services performed by the Executive (whether as an employee or independent contractor) for the Company and its Affiliated Companies over the immediately preceding thirty-six (36)-month period (or such lesser period of services). Notwithstanding the foregoing, if the Executive takes a leave of absence for purposes of military leave, sick leave or other bona fide reason, the Executive will not be deemed to have experienced a Termination of Employment for the first six (6) months of the leave of absence, or if longer, for so long as the Executive’s right to reemployment is provided either by statute or by contract, including this Agreement; provided that if the leave of absence is due to a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than six (6) months, where such impairment causes the Executive to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, the leave may be extended by the Company for up to twenty-nine (29) months without causing a Termination of Employment.

12. Employment Period. The Company hereby agrees to continue the Executive in its employ for the period commencing on the Effective Date and ending on the second anniversary of such date (the “Employment Period”), subject to the provisions of Section 4.

13. Terms of Employment. (a) Position and Duties . i. During the Employment Period, (A) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date and (B) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location.

ii. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such

activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.

(b) Compensation . i. Base Salary . During the Employment Period, the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company and its Affiliated Companies for any month during the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other peer executives of the Company and its Affiliated Companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased.

ii. Annual Bonus . In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the average annualized (for any fiscal year consisting of less than twelve full months or with respect to which the Executive has been employed by the Company for less than twelve full months) bonuses paid or payable, including any amount that would have been paid or have been payable were it not for a mandatory or voluntary deferral of such amount, including pursuant to the Annual and Long-Term Incentive Plans or any counterpart or successor plan(s) thereto, to the Executive by the Company and its Affiliated Companies in respect of the three fiscal years immediately preceding the fiscal year in which the Effective Date occurs (the “Recent Average Bonus”). Each such Annual Bonus shall be paid no later than the fifteenth (15 ^th ) day of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus in accordance with the terms of any deferred compensation plan then in effect.

iii. Incentive, Savings and Retirement Plans . During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its Affiliated Companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its Affiliated Companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its Affiliated Companies. The amount payable to the Executive under any such incentive program(s) for any performance period will be reduced (but not below zero) by the amount of the Annual Bonus paid or payable to the Executive for such performance period in accordance with Section 3(b)(ii) above. Any amounts thereafter payable to the Executive under the incentive program(s) for any performance period shall be paid no later than the fifteenth (15 ^th ) day of the third month of the fiscal

year next following the fiscal year that includes the performance period for which such payments are awarded.

iv. Welfare Benefit Plans . During the Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its Affiliated Companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel, accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its Affiliated Companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its Affiliated Companies.

v. Expenses . During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its Affiliated Companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliated Companies.

vi. Fringe Benefits . During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its Affiliated Companies in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliated Companies.

vii. Office and Support Staff . During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its Affiliated Companies at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its Affiliated Companies.

viii. Vacation . During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its Affiliated Companies as in effect for the Executive at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer incentives of the Company and its Affiliated Companies.

14. Termination of Employment. (a) Death or Disability . The Executive’ shall Terminate Employment automatically upon the Executive’s death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive or his legal representative written

notice in accordance with Section 11(b) of this Agreement of its intention to Terminate the Executive’s Employment. In such event, the Executive’s Termination of Employment shall occur effective on the 30th day after receipt of such notice by the Executive or his legal representative (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full time basis for 180 consecutive business days as a result of a medically determinable physical or mental impairment that can be expected to result in death or is otherwise total and permanent as determined by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative (such agreement as to acceptability not to be withheld unreasonably).

(b) Cause . The Company may Terminate the Employment of the Executive during the Employment Period for Cause. For purposes of this Agreement, “Cause” shall mean (i) repeated violations by the Executive of the Executive’s obligations under Section 3(a) of this Agreement (other than as a result of incapacity due to physical or mental illness) which are demonstrably willful and deliberate on the Executive’s part, which are committed in bad faith or without reasonable belief that such violations are in the best interests of the Company and which are not remedied in a reasonable period of time after receipt of written notice from the Company specifying such violations or (ii) the conviction of the Executive of a felony involving moral turpitude. For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company (or any act which the Executive omits to do because of the Executive’s reasonable belief that such act would violate law or the Company’s standards of ethical conduct in its corporate policies) shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding the Executive, if the Executive is a member of the Board) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive committed the conduct described in Section 4(b)(i) or 4(b)(ii), and specifying the particulars thereof in detail.

(c) Without Cause . The Company may Terminate the Employment of Executive during the Employment Period without Cause, in which event, without limitation, the provisions of Section 5 shall apply.

(d) Good Reason . The Executive may Terminate Employment for Good Reason during the Employment Period. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following events:

i. the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3(a) of this Agreement,

or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

ii. any failure by the Company to comply with any of the provisions of Section 3(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

iii. the Company’s requiring the Executive to be based at any office or location other than that described in Section 3(a)(i)(B) hereof;

iv. any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement;

v. any failure by the Company to comply with and satisfy Section 10(c) of this Agreement; or

vi. the Company’s request that the Executive perform any illegal, or wrongful act in violation of the Company’s code of conduct policies.

For purposes of this Section 4(d), any good faith determination of “Good Reason” made by the Executive shall be conclusive.

(e) Without Good Reason . The Executive’s employment may be terminated during the Employment Period by the Executive without Good Reason.

(f) Notice of Termination . Any Termination of the Executive’s Employment by the Company or by the Executive shall be communicated by a Notice of Termination given to the other party hereto. Such Notice of Termination shall satisfy the requirements set forth in Section 11(b) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement which is relied upon as a basis for the Termination of the Executive’s Employment, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for Termination of the Executive’s Employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the Date of Termination (which date shall not be more than fifteen (15) days after the date the Notice of Termination is tendered to the other party). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights under this Agreement. Subject to the provisions of Section 5, the Executive’s Employment Period ends at 11:59 p.m. on the Executive’s Date of Termination.

(g) Date of Termination . “Date of Termination” means the date of which the Executive’s Termination of Employment occurs, as follows: (i) if the Executive’s Termination of Employment is by the Company for Cause, or by the Executive for Good Reason or for other than Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive’s

Termination of Employment is by the Company other than for Cause or Disability, the date on which the Company notifies the Executive of such termination and (iii) if the Executive’s Termination of Employment is by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be.

15. Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability . If, during the Employment Period, the Executive’s Termination of Employment shall be by Company other than for Cause or Disability or by the Executive for Good Reason, then, subject to the provisions of Section 8:

i. the Company shall pay to the Executive in a lump sum in cash the aggregate of the following amounts (such aggregate amounts shall be hereinafter referred to as the “Special Termination Amount”):

(1) the sum of (1) the Executive’s Annual Base Salary through the Date of Termination and any Annual Bonus(es) that relate to performance periods that have ended on or before the Date of Termination, (2) the product of (x) the higher of (I) the Recent Average Bonus and (II) the Annual Bonus paid or payable, including any amount that would have been paid or would be payable were it not for a mandatory or voluntary deferral of such amount (and annualized for any fiscal year consisting of less than twelve full months or for which the Executive has been employed for less than twelve full months) for the most recently completed fiscal year during the Employment Period, if any (the “Highest Annual Bonus”) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 ( provided that , if the Executive’s Date of Termination is the same day as a Change of Control occurs as defined in the Annual and Long-Term Incentive Plans or any counterpart or successor plans thereto, the amount payable under this clause (2) shall be reduced (but not below zero) by the amounts paid or payable under such plans as a result of the Change of Control); and (3) any accrued vacation pay; in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the “Accrued Obligations”); and

(2) the amount equal to the product of (1) three and (2) the sum of (x) the Executive’s Annual Base Salary and (y) the Highest Annual Bonus; and

(3) a separate lump-sum supplemental retirement benefit equal to:

(a) if the Executive is participating in the Johnson Controls, Inc. Pension Plan (or any successor plan thereto) (the “Pension Plan”) and/or is accruing a supplemental defined benefit amount under the Johnson Controls, Inc. Restoration Benefit Plan (the “Restoration Plan”) or any other supplemental and/or excess retirement plan that provides a defined benefit-type accrual for the Executive (the “SERP”) as of the Effective Date, the amount, if any, by which (A) the actuarial equivalent single-sum value (utilizing for this purpose the actuarial assumptions utilized to determine lump sum payments as of the Date of Termination with respect to the Pension Plan) of the benefit payable under the Pension Plan, the related defined benefit component of the Restoration Plan or any other SERP which the Executive would receive if the Executive’s employment continued at the compensation level provided for in Sections 3(b)(i) and 3(b)(ii) of this Agreement until the second anniversary of the Effective Date, assuming for this purpose that all accrued benefits are fully vested and that benefit accrual formulas and the actuarial assumptions are no less advantageous to the Executive than those most favorable to the Executive and in effect during the 90-day

period immediately preceding the Effective Date and assuming that the benefits commence on the earliest date following Termination of Employment on which the Executive would be eligible to commence benefits under the Pension Plan, exceeds (B) the actuarial equivalent single-sum value (utilizing for this purpose the same actuarial assumptions as were utilized in clause (1) above) of the Executive’s actual benefit (paid or payable) with payment assumed to have commenced at the same time as under clause (1) above, if any, under the Pension Plan, the Restoration Plan and the SERP; or

(b) if the Executive is participating in the Johnson Controls, Inc. Savings and Investment (401k) Plan, or any successor plan thereto (the “SIP”), and/or is eligible for any supplemental defined contribution benefits under the Restoration Plan or any other supplemental or excess retirement plan that provides a defined contribution-type benefit for the Executive (the “DC SERP”) as of the Effective Date, the amount equal to the Company non-matching and non-elective deferral contributions that would have been made for the Executive under the SIP, the Restoration Plan and the DC SERP if the Executive’s employment continued at the compensation level provided for in Sections 3(b)(i) and 3(b)(ii) of this Agreement until the second anniversary of the Effective Date, assuming for this purpose that the Executive’s accounts are fully vested and that the contribution formulas are no less advantageous to the Executive than those most favorable to the Executive and in effect during the 90-day period immediately preceding the Effective Date, but determined without regard to any interest such amounts would have earned until the second anniversary of the Effective Date.

Such lump sum shall be paid within thirty (30) business days after the Executive’s Separation from Service, provided that (x) if the Executive is a Specified Employee, payment will be delayed until no earlier than six (6) months and no later than seven (7) months after the date of the Executive’s Separation from Service, and if so delayed, such payment shall be accompanied by a payment of interest at an annual rate equal to the “prime rate” as published from time to time by The Wall Street Journal, such rate changing as and when such published rate changes (the “Prime Rate”), compounded quarterly, and (y) if the Effective Date is prior to a Change of Control pursuant to Section 1(a)(ii), payment will be made within thirty (30) business days following the Change of Control.

ii. until the second anniversary of the Effective Date, or such longer period as any plan, program, practice or policy may provide, the Company shall continue welfare benefits to the Executive and/or the Executive’s family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(b)(iv) of this Agreement if the Executive’s Employment had not been Terminated in accordance with the most favorable plans, practices, programs or policies of the Company and its Affiliated Companies applicable generally to other peer executives and their families during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its Affiliated Companies and their families, provided, however , that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed

until the second anniversary of the Effective Date and to have retired on the last day of such period. With respect to the foregoing:

(1) If applicable, following the end of the COBRA continuation period, if such health care coverage is provided under a health plan that is subject to Code Section 105(h), benefits payable under such health plan shall comply with the requirements of Treasury regulation section 1.409A-3(i)(1)(iv)(A) and (B) and, if necessary, the Company shall amend such health plan to comply therewith. The continuation of health care coverage hereunder shall count as COBRA continuation coverage;

(2) If the Executive is a Specified Employee, then during the first six (6) months following the Executive’s Separation from Service, the Executive shall pay the Company for any life insurance coverage that provides a benefit in excess of $50,000 under a group term life insurance policy. After the end of such six (6)-month period, the Company shall make a cash payment to the Executive equal to the aggregate premiums paid by the Executive for such coverage, and such payment shall be credited with interest at an annual rate equal to the Prime Rate, compounded quarterly, and thereafter such coverage shall be provided at the expense of the Company for the remainder of the period ending on the second anniversary of the Effective Date; and

(3) If the Effective Date is prior to a Change of Control pursuant to Section 1(a)(ii), then the Company shall fulfill its obligations hereunder by providing retroactive welfare benefits coverage to the Executive’s Date of Termination and, if the Executive has paid COBRA premiums for health care coverage from the Date of Termination through the date of the Change of Control, the Company shall reimburse the Executive for the aggregate amount of such COBRA premiums within thirty (30) business days following the Change of Control, without liability for interest thereon; and

iii. to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive pursuant to this Agreement under any plan, program, policy or practice or contract or agreement of the Company and its Affiliated Companies (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”).

(b) Death . If the Executive’s Termination of Employment is by reason of the Executive’s death during the Employment Period, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of the Special Termination Amount and the timely payment or provision of Other Benefits. The Special Termination Amount shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include, and the Executive’s family shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and any of its Affiliated Companies to surviving families of peer executives of the Company and such Affiliated Companies under such plans, programs, practices and policies relating to family death benefits, if any, as in effect with respect to other peer executives and their families at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and its Affiliated Companies and their families.

(c) Disability . If the Executive’s Termination of Employment is by reason of the Executive’s Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of the Special Termination Amount and the timely payment or provision of Other Benefits. The Special Termination Amount shall be paid to the Executive at the same time and in the same manner as the payment would be made pursuant to Section 5(a). With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and Other Benefits at least equal to the most favorable of those generally provided by the Company and its Affiliated Companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its Affiliated Companies and their families.

(d) Termination by Company for Cause; Termination by Executive for Other than for Good Reason .

i. If the Executive’s Termination of Employment during the Employment Period is by the Company for Cause, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive his Annual Base Salary through the Date of Termination (subject to any deferral election then in effect) and the payment, in accordance with the terms of the Johnson Controls, Inc. Executive Deferred Compensation Plan and the Johnson Controls, Inc. Retirement Restoration Plan (or other relevant nonqualified deferred compensation plan), of any previously vested amounts, in each case to the extent theretofore unpaid.

ii. If the Executive voluntarily Terminates Employment during the Employment Period, excluding a Termination of Employment for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within thirty (30) business days of the Executive’s Separation from Service; provided that if the Executive is a Specified Employee, payment will be delayed until no earlier than six (6) months and no later than seven (7) months after the date of Separation from Service, and, if so delayed, such payment shall be credited with interest at an annual rate equal to the Prime Rate, compounded quarterly.

16. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its Affiliated Companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its Affiliated Companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its Affiliated Companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.

17. Full Settlement. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section 6(a)(ii), such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the Prime Rate, compounded quarterly. The Company shall make such payment to the Executive within thirty (30) business days (but in no event later than the end of the calendar year following the calendar year in which the Executive incurred such fees and expenses) following receipt from the Executive of documentation substantiating such fees and expenses.

18. 280G Provision.

(a) Notwithstanding any other provision of this Agreement, if any portion of the Special Termination Amount or any other payment, distribution, or benefit in the nature of compensation (within the meaning of Code Section 280G(b)(2)) under this Agreement, or under any other agreement with the Executive or plan of the Company or its Affiliated Companies (in the aggregate, “Total Payments”), would constitute an “excess parachute payment” and would, but for this Section 8(a), result in the imposition on the Executive of an excise tax under Code Section 4999 (the “Excise Tax”), then the Total Payments to be made to the Executive shall either be (i) delivered in full, or (ii) delivered in such amount so that no portion of such Total Payment would be subject to the Excise Tax, whichever of the foregoing results in the receipt by the Executive of the greatest benefit on an after-tax basis (taking into account the applicable federal, state and local income taxes and the Excise Tax).

(b) Within forty (40) days following the Executive’s Termination of Employment or notice by one party to the other of its belief that there is a payment or benefit due the Executive that will result in an excess parachute payment, the Executive and the Company, at the Company’s expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel (“National Tax Counsel”) selected by the Company’s independent auditors and reasonably acceptable to the Executive (which may be regular outside counsel to the Company), which opinion sets forth (i) the amount of the Base Period Income (as defined below), (ii) the amount and present value of the Total Payments, (iii) the amount and present value of any excess parachute payments determined without regard to any reduction of Total Payments pursuant to Section 8(a), and (iv) the net after-tax proceeds to the Executive, taking into account the tax imposed under Code Section 4999 if (x) the Total Payments were reduced in accordance with Section 8(a)(ii), or (y) the Total Payments were not so reduced. The opinion of National Tax Counsel shall be addressed to the Company and the Executive and shall be binding upon the Company and the Executive. If such National Tax Counsel opinion determines that clause (ii) of Section 8(a) applies, then the Payments hereunder or any other payment or benefit determined by such counsel to be includable

in Total Payments shall be reduced or eliminated so that under the bases of calculations set forth in such opinion there will be no excess parachute payment. In such event, payments or benefits included in the Total Payments shall be reduced or eliminated by applying the following principles, in order: (1) the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio; (2) the payment or benefit with the later possible payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Code Section 409A, then the reduction shall be made pro rata among the payments or benefits included in the Payments (on the basis of the relative present value of the parachute payments).

(c) For purposes of this Agreement: (i) the terms “excess parachute payment” and “parachute payments” shall have the meanings assigned to them in Code Section 280G and such “parachute payments” shall be valued as provided therein. Present value for purposes of this Agreement shall be calculated in accordance with Code Section 280G(d)(4); (ii) the term “Base Period Income” means an amount equal to the Executive’s “annualized includible compensation for the base period” as defined in Code Section 280G(d)(1); (iii) for purposes of the opinion of National Tax Counsel, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4), which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Executive; and (iv) the Executive shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation, and state and local income taxes at the highest marginal rate of taxation in the state or locality of the Executive’s domicile (determined in both cases in the calendar year in which the Covered Termination or notice described in Section 8(b) is given, whichever is earlier), net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

(d) If such National Tax Counsel so requests in connection with the opinion required by this Section 8, the Executive and the Company shall obtain, at the Company’s expense, and the National Tax Counsel may rely on, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Executive solely with respect to its status under Code Section 280G.

(e) The Company agrees to bear all costs associated with, and to indemnify and hold harmless, the National Tax Counsel of and from any and all claims, damages, and expenses resulting from or relating to its determinations pursuant to this Section 8, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of such firm.

(f) This Section 8 shall be amended to comply with any amendment or successor provision to Sections 280G or 4999 of the Code. If such provisions are repealed without successor, then this Section 8 shall be cancelled without further effect.

19. Confidential Information. (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its Affiliated Companies, and their respective

businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or any of its Affiliated Companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). During employment and for two years after the Executive’s Termination of Employment, the Executive, except as may otherwise be required by law or legal process, shall not use any such information except on behalf of the Company and shall not communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. This covenant shall survive the termination of this Agreement. Nothing in this paragraph is intended or shall be construed to limit in any way Executive’s independent duty not to misappropriate Trade Secrets of the Company.

(b) “Trade Secret” means information of the Company and its Affiliated Companies, including a formula, pattern, compilation, program, device, method, technique or process, that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and that is the subject of efforts by the Company or an Affiliated Company to maintain its secrecy that are reasonable under the circumstances. During employment with the Company and its Affiliated Companies, Executive shall preserve and protect Trade Secrets from unauthorized use or disclosure, and after Termination of Employment, Executive shall not use or disclose any Trade Secret until such time as that Trade Secret is no longer a secret as a result of circumstances other than a misappropriation involving the Executive.

20. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effective date of such purchase, merger, consolidation or other transaction shall be a breach of this Agreement constituting “Good Reason” hereunder, except that for purposes of implementing the foregoing, the date upon which such purchase, merger, consolidation or other transaction becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

21. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive :

If to the Company :

Johnson Controls, Inc.
5757 North Green Bay Avenue
Milwaukee, Wisconsin 53209
Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. In addition, if prior to the date of payment of any payment hereunder, the Federal Insurance Contributions Act (FICA) tax imposed under Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due with respect to any payment or benefit to be provided hereunder, the Company shall (unless otherwise directed by the Executive, to the extent such direction does not cause a violation of Code Section 409A) provide for an immediate payment of the amount needed to pay the Executive’s portion of such tax (plus an amount equal to the taxes that will be due on such amount) and the Special Termination Amount shall be reduced accordingly.

(e) The Executive’s or the Company’s failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to Terminate Employment for Good Reason pursuant to Section 4(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

(f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and, prior to the Effective Date, may be terminated by either the Executive or the Company at any time. Moreover, if prior to the Effective Date, (i) the Executive’s employment with the Company terminates or (ii) the Executive ceases to be an officer of the Company, then the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other employment agreement between the parties.

(g) This Agreement shall be governed by the laws of the State of Wisconsin, without reference to conflict of law principles thereof.

i. If, after a Change of Control, any payment amount or the value of any benefit under this Agreement is required to be included in an Executive’s income prior to the date such amount is actually paid or the benefit provided as a result of the failure of this Agreement (or any other arrangement that is required to be aggregated with this Agreement under Code Section 409A) to comply with Code Section 409A, then the Executive shall receive a payment, in a lump sum, within ninety (90) days after the date it is finally determined that the Agreement (or such other arrangement that is required to be aggregated with this Agreement) fails to meet the requirements of Section 409A of the Code; such payment shall equal the amount required to be included in the Executive’s income as a result of such failure and shall reduce the amount of payments or benefits otherwise due hereunder.

ii. The Company and the Executive intend the terms of this Agreement to be in compliance with Section 409A of the Code. To the maximum extent permissible, any ambiguous terms of this Agreement shall be interpreted in a manner which avoids a violation of Section 409A of the Code.

(h) To avoid a violation of Section 409A of the Code, the Executive acknowledges that, with respect to payments that may be payable or benefits that may be provided under this Agreement that are subject to Section 409A of the Code and that are not timely paid or provided, the Executive must make a reasonable, good faith effort to collect any payment or benefit to which the Executive believes the Executive is entitled hereunder no later than ninety (90) days after the latest date upon which the payment should have been made or benefit provided under this Agreement, and if not paid or provided, must take further enforcement measures within one hundred eighty (180) days after such latest date. Failure to comply with these deadlines will not result in the loss of any payment or benefit to which the Executive is otherwise entitled.

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.


		JOHNSON CONTROLS, INC.
		By:
			Stephen Roell, CEO


		PricewaterhouseCoopers LLP
		100 E. Wisconsin Ave., Suite 1800
Exhibit 15		Milwaukee WI 53202
		Telephone (414) 212 1600

August 3, 2010

Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549

Re: Johnson Controls, Inc. Registration Statement Nos. 33-57685, 33-64703, 333-13525, 333-59594, 333-111192, 333-130714, 333-155802, and 333-157502 on Form S-3 and 33-30309, 33-31271, 33-58092, 33-58094, 333-10707, 333-66073, 333-41564, 333-141578 and 333-117898 on Form S-8.

Commissioners:

We are aware that our report dated August 3, 2010 on our review of interim financial information of Johnson Controls, Inc. (the “Company”) as of and for the three-month and nine-month periods ended June 30, 2010 and 2009 and included in the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2010 is incorporated by reference in the above referenced Registration Statements.

Very truly yours,

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Exhibit 31.1

CERTIFICATIONS

I, Stephen A. Roell, Chairman and Chief Executive Officer, of Johnson Controls, Inc., certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Johnson Controls, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	a.		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2010


		/s/ Stephen A. Roell
		Stephen A. Roell
		Chairman and Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, R. Bruce McDonald, Executive Vice President and Chief Financial Officer of Johnson Controls, Inc., certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Johnson Controls, Inc.;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a.		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2010


		/s/ R. Bruce McDonald
		R. Bruce McDonald
		Executive Vice President and
		Chief Financial Officer

Exhibit 32

CERTIFICATION OF PERIODIC FINANCIAL REPORTS

We, Stephen A. Roell, Chairman and Chief Executive Officer, and R. Bruce McDonald, Executive Vice President and Chief Financial Officer, of Johnson Controls, Inc., certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.		the Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 (Periodic Report) to which this statement is an exhibit fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and

2.		information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Johnson Controls, Inc.

Date: August 3, 2010


		/s/ Stephen A. Roell
		Stephen A. Roell
		Chairman and Chief Executive Officer

		/s/ R. Bruce McDonald

		R. Bruce McDonald
		Executive Vice President and
		Chief Financial Officer