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 our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 9, 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), nickel-metal-hydride and lithium-ion battery technologies to power hybrid vehicles.

The following information should be read in conjunction with the September 30, 2008 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 2008 Annual Report on Form 10-K. References in the following discussion and analysis to "Three Months" refer to the three months ended June 30, 2009, compared to the three months ended June 30, 2008, while references to "Year-to-Date" refer to the nine months ended June 30, 2009, compared to the nine months ended June 30, 2008. Outlook
The global economic environment remained unstable through the third quarter of fiscal 2009. The automotive industry experienced extended production shut-downs in North America as a result of bankruptcy filings by both General Motors Corporation (GM) and Chrysler LLC (Chrysler) during the quarter. Through the first three quarters of fiscal 2009, automotive production has declined by a double digit rate in North America and Europe compared to the similar period in 2008, with virtually every automotive manufacturer affected. There are signs indicating the automotive markets are beginning to stabilize, such as improving credit availability for car buyers. In Europe, government support programs have increased sales of smaller vehicles in that region. Additionally, automotive production in China has increased in fiscal 2009 compared to fiscal 2008, and the government support program in the U.S. is expected to stimulate automotive sales in the U.S. Therefore, we expect our automotive experience business to be profitable in the fourth quarter of fiscal 2009.
The softening in the commercial construction market is primarily concentrated in the office, retail and lodging sectors whereas, institutional buildings such as government, healthcare and education, which are the primary focus of our building efficiency business, remained the strongest sectors of new construction. Due to the uncertain economic environment, some commercial customers have deferred service and maintenance work, and there have been delays in energy efficiency projects pending clarification of government stimulus funding guidelines. In spite of this, we believe that we are well-positioned to benefit from future potential government energy efficiency programs. We are working to reduce our variable and fixed costs in response to the general economic decline. In the fourth quarter of fiscal 2008 and in the second quarter of fiscal 2009, we announced restructuring plans intended to improve our cost structure and rebalance production within each regional footprint. We have seen some benefit from these plans in the third quarter of fiscal 2009 and expect greater benefits from these initiatives in the fourth quarter of fiscal 2009. Despite the decline in automotive production, we believe that power solutions is well positioned with its strong global market share in the more stable aftermarket sector.
Liquidity and Capital Resources
The Company believes its capital resources and liquidity position at June 30, 2009, 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 2009 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 has experienced uninterrupted access in the U.S. commercial paper market, while the euro market periodically closes for the Company and other U.S. multinationals. 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. Further downgrades in the Company's credit rating could negatively impact its access to the commercial paper market. 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 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 stockholders' equity of at least $1.31 billion at all times and allow a maximum aggregated amount of 10% of consolidated stockholders' equity for liens and pledges. For purposes of calculating the Company's covenants, consolidated stockholders' equity is calculated without giving effect to (i) the application of the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement

Benefits Other Than Pensions" or (ii) the cumulative foreign currency translation adjustment. As of June 30, 2009, consolidated stockholders' equity as defined per our covenants was $7.8 billion and there were no outstanding amounts for liens and pledges. The Company expects to be in compliance with all covenants and other requirements set forth in its credit agreements and indentures in 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. Our most recent actuarial valuation utilized an expected rate of return of 8.5% and 5.5% for U.S. and non-U.S. plans, respectively. Given the recent credit market crisis and losses in equity markets, the Company anticipates the actual rate of return will likely be well below these rates in fiscal 2009. However, the Company still believes the long-term rate of return will approximate 8.5% and 5.5% 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. Based on the current funded status of its defined benefit plans in the U.S., the Company's minimum funding requirements for the remainder of fiscal 2009, and through the first quarter of fiscal 2010, is approximately $21 million per quarter. The Company also monitors its non-U.S. plans' funded status and meets all minimum funding requirements. The Company is reviewing the annual incremental funding requirements for its non-U.S. plans resulting from the recent global equity market performance to determine if additional funding is required. In fiscal 2009, the Company made discretionary pension contributions of approximately $75 million. 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 minority interests excluding net financing charges and restructuring costs.

Summary

                           Three Months Ended                    Nine Months Ended
                                June 30,                             June 30,
       (in millions)        2009         2008       Change       2009         2008       Change
       Net sales         $  6,979      $ 9,865        -29 %   $ 20,630     $ 28,755        -28 %
       Segment income         282          645        -56 %       (147 )      1,472          *

* Measure not meaningful

Three Months:
• The $2.9 billion decrease in consolidated net sales was primarily due to lower sales in the automotive experience business ($1.5 billion) as a result of significantly reduced industry production levels by all our major original equipment manufacturers (OEM's) primarily in North America and Europe, the unfavorable impact of foreign currency translation ($684 million), the impact of lower lead costs on pricing and lower sales volumes in the power solutions business ($455 million) and lower net sales in the building efficiency business ($252 million) primarily due to lower technical services demand as customers continue to defer routine maintenance and equipment retrofit projects.

• The $363 million decrease in segment income was primarily due to lower volumes across all businesses ($375 million) and the unfavorable effects of foreign currency translation ($35 million), offset by lower SG&A costs ($47 million), including the benefits from cost reduction initiatives.

Year-to-Date:
• The $8.1 billion decrease in consolidated net sales was primarily due to lower sales in the automotive experience business ($4.5 billion) as a result of significantly reduced industry production levels by all our major OEM's primarily in North America and Europe, the unfavorable impact of foreign currency

translation ($1.9 billion), and in the power solutions business, primarily the impact of lower lead costs on pricing and lower sales volumes ($1.4 billion).

• The $1.6 billion decrease in segment income was primarily due to lower volumes mainly in the automotive experience business as a result of significantly reduced industry production volumes, lead costs not recovered through pricing, first quarter impairment charges recorded on an equity investment ($152 million) in the building efficiency North American unitary products segment and certain fixed asset impairment charges recorded in the automotive experience North America and Europe segments ($77 million and $33 million, respectively) and the unfavorable impact of foreign currency translation ($110 million).

Building Efficiency - Net Sales

                                Three Months                                   Nine Months
                               Ended June 30,                                Ended June 30,
(in millions)               2009           2008           Change          2009            2008           Change
North America systems      $   563        $   605              -7 %      $ 1,671        $  1,680              -1 %
North America service          552            626             -12 %        1,610           1,749              -8 %
North America unitary
products                       227            235              -3 %          477             550             -13 %
Global workplace
solutions                      708            785             -10 %        2,095           2,347             -11 %
Europe                         517            716             -28 %        1,587           1,997             -21 %
Rest of world                  600            710             -15 %        1,779           1,897              -6 %

                           $ 3,167        $ 3,677             -14 %      $ 9,219        $ 10,220             -10 %

Three Months:
• The decrease in North America systems was primarily due to lower volumes of control systems and equipment in the commercial construction and replacement markets ($36 million) and the unfavorable impact from foreign currency translation ($6 million).

• The decrease in North America service was primarily due to lower truck-based business ($87 million) and the unfavorable impact of foreign currency translation ($8 million), partially offset by higher volumes in energy solutions ($21 million).

• The decrease in North America unitary products was primarily due to a depressed U.S. residential market, which impacts the demand for HVAC equipment in new construction housing starts.

• The decrease in global workplace solutions was primarily due to the unfavorable impact of foreign currency translation ($96 million), partially offset by new business in Europe.

• The decrease in Europe reflects the unfavorable impact of foreign currency translation ($127 million) and lower control systems and product demand across the region.

• The decrease in rest of world was due to volume decreases mainly in Latin America ($56 million) and Asia ($35 million) and the unfavorable impact of foreign currency translation ($19 million).

Year-to-Date:
• The decrease in North America systems was primarily due to the unfavorable impact of foreign currency translation ($21 million), partially offset by the impact of prior year acquisitions ($12 million).

• The decrease in North America service was primarily due to lower truck-based business ($169 million) and the unfavorable impact of foreign currency translation ($25 million), partially offset by increased volume of energy solutions ($55 million).

• The decrease in North America unitary products was primarily due to a depressed U.S. residential market, which impacts the demand for HVAC equipment in new construction housing starts.

• The decrease in global workplace solutions primarily reflects the unfavorable impact of foreign currency translation ($295 million) and lower volume of pass through contracts in Europe and Asia, partially offset by higher volumes in North America and new business in Europe.

• The decrease in Europe reflects primarily the unfavorable impact of foreign currency translation ($325 million) and a reduction in control systems and products and specialty volumes.

• The decrease in rest of world is due to volume decreases in Latin America ($77 million) and Asia ($28 million) and the unfavorable impact of foreign currency translation ($33 million), partially offset by higher volumes in the Middle East and other markets ($20 million).

Building Efficiency - Segment Income

                                Three Months                                   Nine Months
                               Ended June 30,                                 Ended June 30,
(in millions)                2009            2008          Change           2009           2008          Change
North America systems      $      63        $   80             -21 %      $    173        $  192             -10 %
North America service             58            76             -24 %           129           144             -10 %
North America unitary
products                          (2 )           3               *            (227 )        (20)               *
Global workplace
solutions                         10            16             -38 %            24            45             -47 %
Europe                            12            38             -68 %            36            78             -54 %
Rest of world                     49            88             -44 %           124           202             -39 %

                           $     190        $  301             -37 %      $    259        $  641             -60 %

* Measure not meaningful

Three Months:
• The decrease in North America systems was primarily due to lower volumes ($10 million), unfavorable margin rates ($9 million) and the unfavorable impact of foreign currency translation ($1 million), partially offset by lower SG&A expenses ($3 million).

• The decrease in North America service was primarily due to lower volumes in truck-based services ($19 million) and the unfavorable impact of foreign currency translation ($1 million), offset by lower SG&A expenses ($2 million).

• The decrease in North America unitary products was primarily due to the decline in sales volumes and unfavorable margin rates due primarily to unfavorable factory absorption.

• The decrease in global workplace solutions is primarily due to the unfavorable impact of foreign currency translation ($3 million) and lower margins ($3 million) due primarily to lower initial margins on new business.

• The decrease in Europe was primarily due to lower margin rates on lower sales volumes ($38 million) and the unfavorable impact of foreign currency translation ($7 million), partially offset by lower SG&A costs ($19 million) due in part to the benefits of cost reduction initiatives.

• The decrease in rest of world was primarily due to lower overall sales volumes, offset by the impact of foreign currency translation ($1 million) and lower SG&A expenses.

Year-to-Date:
• The decrease in North America systems was primarily due to lower volumes, unfavorable margin rates, and the unfavorable impact of foreign currency translation ($1 million), partially offset by lower SG&A expenses.

• The decrease in North America service was primarily due to lower volumes, partially offset by lower SG&A expenses.

• The decrease in North America unitary products was primarily due to an equity investment impairment charge ($152 million), the decline in sales volumes, and inventory and related charges ($20 million).

• The decrease in global workplace solutions was primarily due to higher bad debt expense due to a customer bankruptcy ($4 million), unfavorable mix in North America ($8 million), and the unfavorable impact of foreign currency translation ($9 million).

• The decrease in Europe was primarily due to lower volumes ($59 million) and the unfavorable impact of foreign currency translation ($17 million), partially offset by lower SG&A expenses ($34 million) due in part to the benefits of cost reduction initiatives.

• The decrease in rest of world was primarily due to lower volumes, a gain on the sale of a business in the prior year ($6 million), the impact of foreign currency on imported products sold in Latin America and higher SG&A expense for investments in other regions, partially offset by the favorable impact of foreign currency translation ($1 million).

Automotive Experience - Net Sales

                           Three Months                          Nine Months
                          Ended June 30,                        Ended June 30,
        (in millions)    2009        2008        Change       2009         2008        Change
        North America   $   988     $ 1,681          -41 %   $ 3,279     $  5,199          -37 %
        Europe            1,706       2,705          -37 %     4,478        7,657          -42 %
        Asia                262         402          -35 %       775        1,171          -34 %

                        $ 2,956     $ 4,788          -38 %   $ 8,532     $ 14,027          -39 %

Three Months:
• The decrease in North America was primarily due to the significantly reduced industry production volumes, partially offset by increased sales resulting from the acquisition of the interior product assets of Plastech Engineered Products, Inc. in July 2008 ($97 million).

• The decrease in Europe was primarily due to lower production volumes across all customers ($679 million) and the unfavorable impact of foreign currency translation ($320 million).

• The decrease in Asia was primarily due to lower production volumes ($123 million) and the unfavorable impact of foreign currency translation ($17 million).

Year-to-Date:
• The decrease in North America was primarily due to the significantly reduced industry production volumes by all the Company's major OEMs ($2.2 billion), partially offset by the acquisition of the interior product assets of Plastech Engineered Products, Inc. in July 2008, which had a favorable impact of $299 million.

• The decrease in Europe was primarily due to lower industry production volumes across all customers ($2.3 billion) and the unfavorable impact of foreign currency translation ($896 million).

• The decrease in Asia was primarily due to lower production volumes mainly in Korea and Japan ($299 million) and the unfavorable impact of foreign currency translation ($97 million).

Automotive Experience - Segment Income

                            Three Months                          Nine Months
                           Ended June 30,                       Ended June 30,
         (in millions)     2009        2008       Change        2009        2008      Change
         North America   $     (34 )   $  47            *     $    (370 )   $  82           *
         Europe                  3       139          -98 %        (238 )     334           *
         Asia                   17        13           31 %         (10 )      16           *

                         $     (14 )   $ 199            *     $    (618 )   $ 432           *

* Measure not meaningful

Three Months:
• The decrease in North America was primarily due to lower industry production volumes ($130 million), partially offset by lower net engineering costs ($30 million) as a result of delays in customer programs and favorable SG&A costs ($19 million) due to the benefits of cost reduction initiatives.

• The decrease in Europe was primarily a result of lower industry production volumes ($158 million), the unfavorable impact of foreign currency translation ($18 million), partially offset by lower operating costs ($29 million) and favorable SG&A expense ($11 million) due to the benefits of cost reduction initiatives.

• The increase in Asia was primarily due to higher equity income at our joint ventures mainly in China ($7 million), reduced SG&A costs ($5 million) including the benefits of cost reduction initiatives and lower net engineering costs ($4 million), partially offset by lower volumes ($11 million) and the unfavorable impact of foreign currency translation ($1 million).

Year-to-Date:
• The decrease in North America was primarily due to lower industry production volumes ($462 million) and an impairment charge on fixed assets in the first quarter ($77 million). These increases were partially offset by lower engineering expenses ($44 million) and SG&A costs ($43 million) including the benefits of cost reduction initiatives.

• The decrease in Europe was primarily a result of lower industry production volumes ($480 million), an impairment charge on fixed assets in the first quarter ($33 million), the unfavorable impact of foreign currency translation ($60 million), and pricing and increased material costs ($23 million). These increases were partially offset by lower engineering expenses ($13 million) and SG&A costs ($11 million), including the benefits of cost reduction initiatives.

• The decrease in Asia is primarily due to lower volumes ($35 million) and the unfavorable impact of foreign currency translation ($7 million), partially offset by higher equity income at our joint ventures mainly in China . . .